
 




 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-K
 
 ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended March 31, 2024
 
 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                
to             
 
Commission
file number: 001-38426
 
SENMIAO TECHNOLOGY
LIMITED
(Exact name of registrant as specified in its charter)
 
  Nevada   35-2600898   (State or other jurisdiction of incorporation or organization)    (I.R.S. Employer Identification No.) 
 
  16F, Shihao Square, Middle Jiannan Blvd.,  High-Tech Zone Chengdu,  Sichuan, People’s Republic of China   610000  (Address of principal executive offices)   (Zip Code) 
 
Registrant’s
telephone number, including area code: +86 28 61554399
 
Securities registered pursuant to Section 12(b) of
the Act:
 
  Title of each class:   Trading Symbol   Name of each exchange on which registered:  Common Stock, par value $0.0001 per share   AIHS   The Nasdaq Stock Market LLC 
 
Securities
registered pursuant to Section 12(g) of the Act: None
 
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
 
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes 
☐ No ☒
 
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐
 
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No  ☐
 
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
  Large accelerated filer  ☐ Accelerated filer  ☐  Non-accelerated filer  ☒ Smaller reporting company   ☒    Emerging growth company ☐ 
 
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
 
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. ☐
 
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
 
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐ No ☒
 
The registrant’s common
stock trades on the Nasdaq Capital Market under the symbol “AIHS.” The aggregate market value of the common stock held by
non-affiliates computed by reference to the price at which registrant’s common stock was last sold as of September 30, 2023,
was approximately $3,249,412. Common stock held by each officer and director and by each person known to the registrant who owned 10%
or more of the outstanding voting and non-voting common stock have been excluded in that such persons may be deemed to be affiliates.
This determination of affiliate status is not necessarily a conclusive determination for other purposes.
 
As of June 24, 2024, there
were 10,518,040 shares of common stock, par value $0.0001 per share, of the registrant issued and outstanding.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
None.
 

 
 


 
 

 
SENMIAO TECHNOLOGY LIMITED
 
TABLE OF CONTENTS
 


 
 
PAGE

Cautionary Note Regarding Forward-Looking Statements
iii

PART I
 
1

Item 1.
Business
1

Item 1A.
Risk Factors
29

Item 1B.
Unresolved Staff Comments
69

Item 1C
Cybersecurity
69

Item 2.
Properties
70

Item 3.
Legal Proceedings
70

Item 4.
Mine Safety Disclosures
70

 
 
 

PART II
 
71

Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
71

Item 6.
[Reserved]
72

Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
72

Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
87

Item 8.
Financial Statements and Supplementary Data
F-1

Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
88

Item 9A.
Controls and Procedures
88

Item 9B.
Other Information
88

Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
88

 
 
 

PART III
 
89

Item 10.
Directors, Executive Officers and Corporate Governance
89

Item 11.
Executive Compensation
93

Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
96

Item 13.
Certain Relationships and Related Transactions, and Director Independence
97

Item 14.
Principal Accounting Fees and Services
99

 
 
 

PART IV
 
100

Item 15.
Exhibits and Financial Statement Schedules
100

Item 16.
Form 10-K Summary
100

 

i
 

 
Unless otherwise stated in
this Annual Report on Form 10-K (this “Report”), references to:
 

●“China” or the “PRC” refers to the
People’s Republic of China, excluding, for the purposes of this Report only, Hong Kong, Macau and Taiwan;

 

●“Corenel” refers to Chengdu Corenel Technology
Limited, a PRC limited liability company and wholly owned subsidiary of Senmiao Consulting;

 

●“Hunan Ruixi” refers to Hunan Ruixi Financial
Leasing Co., Ltd., our majority owned subsidiary in China;

 

●“Jiekai” refers to Chengdu Jiekai Technology
Ltd., a PRC limited liability company in China and a majority owned subsidiary of Corenel;

 


 
●
“Jinkailong” refers to Sichuan Jinkailong Automobile Leasing Co., Ltd., a PRC limited liability company with 35% equity interest held by Hunan Ruixi;

 

●“Operating Entities” refers to Corenel, Hunan
Ruixi, Jiekai, Senmiao Consulting, XXTX and Yicheng;

 

●“Partner Platforms” refers to other online ride-hailing
platforms our Operating Entities cooperate with;

 

●“Restructuring” refers to the establishment of
a wholly foreign owned entity and the execution of a series of agreements among the Company, Senmiao Consulting, Sichuan Senmiao and
the equity holders of Sichuan Senmiao, pursuant to which we have gained control of and become the primary beneficiary to Sichuan Senmiao;

 

●“RMB” and “Renminbi” refer to the
legal currency of China;

 

●“Senmiao” refers to Senmiao Technology Limited;

 

●“Senmiao Group,” “we,” “us,” “the
Company”, “our company” and “our” refer to Senmiao Technology Limited. and its subsidiaries;

 

●“Senmiao Consulting” refers to Sichuan Senmiao
Zecheng Business Consulting Co., Ltd.;

 


 
●
“Sichuan Senmiao” refers to Sichuan Senmiao Ronglian Technology Co., Ltd., a PRC limited liability company, the majority owned subsidiary of Senmiao Consulting;

 

●“US$,” “U.S. dollars,” “$,”
and “dollars” refer to the legal currency of the United States;

 

●“XXTX” refers to Hunan Xixingtianxia Technology Co., Ltd.
and its subsidiaries, a PRC limited liability company and the wholly owned subsidiary of Senmiao Consulting;

 

●“Yicheng” refers to Sichuan Senmiao Yicheng Assets
Management Co., Ltd., formerly named Yicheng Financial Leasing Co., Ltd., a PRC limited liability company and our wholly owned subsidiary
in China; and

 
We use U.S. dollars as reporting
currency in our financial statements and in this Report. Monetary assets and liabilities denominated in Renminbi are translated into U.S.
dollars at the rates of exchange as of the balance sheet date, equity accounts are translated at historical exchange rates, and revenues,
expenses, gains and losses are translated using the average rate for the period. In other parts of this Report, any Renminbi denominated
amounts are accompanied by translations. We make no representation that the Renminbi or U.S. dollar amounts referred to in this Report
could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. The PRC government
restricts or prohibits the conversion of Renminbi into foreign currency and foreign currency into Renminbi for certain types of transactions.

ii
 

 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This Report, including, without
limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities
Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking
statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,”
“anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,”
“projects,” “predicts,” “continues,” or “should,” or, in each case, their negative or
other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations.
Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business
combination and any other statements that are not statements of current or historical facts. These statements are based on management’s
current expectations, but actual results may differ materially due to various factors, including, but not limited to:
 

●our goals and strategies, including our ability to maintain
our automobile transaction and related services business and our online ride-hailing platform services business in China;

 

●our management’s ability to properly develop and achieve
any future business growth and any improvements in our financial condition and results of operations;

 

●the regulations and the impact by public health epidemics
in China on the industries we operate in and our business, results of operations and financial condition;

 

●the growth or lack of growth in China of disposable household
income and the availability and cost of credit available to finance car purchases;

 

●the growth or lack of growth of China’s online ride-hailing,
automobile financing and leasing industries;

 

●taxes and other incentives or disincentives related to car
purchases and ownership;

 

●fluctuations in the sales and price of new and used cars
and consumer acceptance of financing car purchases;

 

●changes in online ride-hailing, transportation networks,
and other fundamental changes in transportation pattern in China;

 

●our expectations regarding demand for and market acceptance
of our products and services;

 

●our expectations regarding our customer base;

 

●our plans to invest in our automobile transaction and related
services business and our online ride-hailing platform services business;

 

●our ability to maintain positive relationships with our business
partners;

 

●competition in the online ride-hailing, automobile financing
and leasing industries in China;

 

●macro-economic and political conditions affecting the global
economy generally and the market in China specifically; and

 

●relevant Chinese government policies and regulations relating
to the industries in which we operate.

 
The forward-looking statements
contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects
on us. Future developments affecting us may not be those that we have anticipated or over which we may not have any control. These forward-looking
statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual
results or performance to be materially different from those that are expressed or implied by these forward-looking statements. These
risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” in this
Report and our other periodic reports filed by us with the SEC. Should one or more of these risks or unanticipated risks or uncertainties
materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these
forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described
in our periodic reports are not exhaustive.
 
By their nature, forward-looking
statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the
future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations,
financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested
by the forward-looking statements contained in this Report. In addition, even if our results or operations, financial condition and liquidity,
and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those
results or developments may not be indicative of results or developments in subsequent periods.
 

iii
 

 
PART I
 
 Item 1. Business
 
Overview
 
Senmiao is not a Chinese operating
company but a U.S. holding company incorporated in the State of Nevada on June 8, 2017. As a holding company with no material operations
of its own, Senmiao conducts a substantial majority of its operations through its operating entities established in the PRC, including
its subsidiaries and the equity investee company.
 
Since November 2018, we have
been providing automobile transaction and related services focusing on the online ride-hailing industry in the People’s Republic
of China (“PRC” or “China”) through our wholly owned subsidiaries, Yicheng and Corenel, and our majority owned
subsidiaries, Jiekai, and Hunan Ruixi, and its equity investee company, Jinkailong. Since October 2020, we have been operating an
online ride-hailing platform through XXTX, which is a wholly owned subsidiary of Senmiao Consulting. XXTX’s platform enables qualified
ride-hailing drivers to provide transportation services mainly in Chengdu, Changsha and other 20 cities in China as of the date of this
Report. Our business includes Automobile Transaction and Related Services (as defined herein below) and Online Ride-hailing Platform Services,
which constituted a series of services as follows:
 
Automobile Transactions and Related Services
 
Our automobile transaction
and related services (the “Automobile Transaction and Related Services”) are mainly comprised of (i) automobile operating
lease where we provide car rental services to individual customers to meet their personal needs with lease term no more than twelve months
(the “Auto Operating Leasing”); (ii) monthly services where we provide management
and related services to Partner Platforms and other companies and earn commission from them (the “Auto
Commissions”); (iii) automobile financing where we provide our customers with auto finance solutions through financing leases
(the “Auto Financing”); (iv) service fees from new energy vehicles (“NEVs”) leasing, automobile purchase and management
services where we charge NEVs lessees or automobile purchasers for a series of the services provided to them throughout the leasing or
purchase process based on the chosen product solutions, such as ride-hailing driver training, assisting with a series of administrative
procedures and other consulting services (the “NEVs and Purchase Services”); (v) auto management and guarantee services
provided to online ride-hailing drivers after the delivery of automobiles (the “Auto Management and Guarantee Services”);
(vi) automobile sales where we sell new purchased or used cars to our customers (the “Auto Sales”); and (vii) other
supporting services provided to online ride-hailing drivers. Our Operating Entities started the Purchase and NEVs Services, Auto Management
and Guarantee Services, and other supporting services in November 2018, the Auto Sales in January 2019, and Auto Operating Leasing and
Auto Financing in March 2019, respectively.
 
The following chart illustrates the constitution
of our automobile transactions and related services:
 

 


1
 

 
Auto Operating Leasing
 
We, through our subsidiaries,
Hunan Ruixi, Corenel, Jiekai and equity investee company, Jinkailong (the “Auto Business Entities”) in China, have generated
revenue since March 2019 from operating lease services, where the Auto Business Entities lease their own automobiles, sublease automobiles
leased from third-parties or rendered from certain online ride-hailing drivers they served before with their authorization, to other individuals,
including new online ride-hailing drivers, for a lease term of no more than twelve months. We have shifted our business focus to automobile
leasing in accordance with the change of market condition and industry development since the year ended March 31, 2021. Hunan Ruixi is
and Jinkailong was authorized to sublease or sell these drivers’ automobiles in order to offset the repayments those drivers owed
to us and the financial institutions. We also purchase and lease NEVs for subleasing with rental periods of twelve months or less. Excluding
Jinkailong, our other Auto Business Entities leased over 1,400 automobiles with an average monthly rental income of approximately $485
per automobile for the year ended March 31, 2024.
 
Auto Commissions
 
Our Auto Business Entities
generated monthly revenues from the management and related services provided to our Partner Platforms and other companies. We generated
revenues of $196,099 from the monthly services commissions during the year ended March 31, 2024.
 
Auto Financing
 
Hunan Ruixi began offering
auto financing services in March 2019. In a self-operated financing transaction, Hunan Ruixi is a lessor and a customer (i.e., online
ride-hailing driver) is a lessee. Hunan Ruixi offers to the customer a selection of automobiles that were purchased by Hunan Ruixi in
advance. The customer will choose the desirable automobile to be purchased and enter into a financing lease with Hunan Ruixi. During the
term of the financing lease, the customer will have use rights with respect to the automobile. Hunan Ruixi will obtain title to the automobile
upfront and retain such title during the term of the financing lease, as lessor. At the end of the lease term, the customer will pay a
minimal price and obtain full title of the automobile after the financing lease is repaid in full. In connection with the financing lease,
the customer will enter into a service agreement with Hunan Ruixi. We recognized a total interest income of $57,677 for the year ended
March 31, 2024.
 
NEVs and Purchase Services
 
Our Auto Business Entities
charge lease service fees to lessees who rent NEVs from us in Chengdu and Changsha. We also charge automobile purchasers services fees
for a series of the services provided to them throughout the purchase process such as credit assessment, installment of GPS devices, ride-hailing
driver qualification and other administrative procedures. The amount of services fees for NEVs leasing and purchase is based on the product
solutions. Excluding Jinkailong, our other Auto Business Entities had revenue of services of $45,231 from NEVs leasing and $36,637 from
automobile purchase, for the year ended March 31, 2024, respectively.
 
Auto Management and Guarantee Services
 The management and guarantee
services of Hunan Ruixi are provided to online ride-hailing drivers after the delivery of automobiles, covering (i) management services
including, without limitation, ride-hailing driver training, assisting with purchase of insurances, insurance claims and after-sale automobile
services, handling traffic violations and other consulting services; and (ii) guarantee services for the obligations of online ride-hailing
drivers under their financing arrangement with financial institutions. The management and guarantee fees of Hunan Ruixi are based on the
costs of our services and the results of our credit assessment of the automobile purchasers. Hunan Ruixi had revenue of $16,246 from the
management and guarantee services for the year ended March 31, 2024.

 


2
 

 
Auto Sales
 
Our Auto Business Entities
are also engaged in the sales of used-automobiles through Hunan Ruixi and the equity investee company, Jinkailong. Hunan Ruixi sold two
used-automobiles, resulting in an income of $8,822 during the year ended March 31, 2024.
 
Since November 22, 2018,
the acquisition date of Hunan Ruixi, and as of March 31, 2024, the Auto Business Entities have facilitated financing for an aggregate
of 312 automobiles with a total value of approximately $5.3 million, sold an aggregate of 1,516 automobiles with a total value of approximately
$14.5 million and delivered 1,892 automobiles under operating leases and 164 automobiles under financing leases to customers,
the vast majority of whom are online ride-hailing drivers.
 
Ride-Hailing Platform Services
 
As part of our goal to provide
an all-solution for online ride-hailing drivers as well as to increase our competitive power in an increasingly competitive online ride-hailing
industry and to take advantage of the market potential, in October 2020, we, through XXTX, began operating an online ride-hailing
platform (called Xixingtianxia) in Chengdu. Our ride hailing platform enables qualified ride-hailing drivers to provide application-based
transportation services in China. XXTX holds a national online reservation taxi operating license. The platform is presently servicing
ride-hailing drivers in 22 cities in China, including Chengdu, Changsha, Guangzhou and so on, providing them with a platform to view and
take customer orders for rides. XXTX currently collaborates with Gaode Map, a well-known aggregation platform in China on our ride-hailing
platform services. Under the collaboration, when a rider searches for taxi/ride-hailing services on the aggregation platform, the platform
provides such rider a number of online ride-hailing platforms for selection, including ours and if our platform is selected by the rider,
the order will then be distributed to registered drivers on our platform for viewing and acceptance. The rider may also simultaneously
select multiple online ride-hailing platforms, in which case, the aggregation platform will distribute the requests to different online
ride-hailing platforms which they cooperate with, based on the number of available drivers using the platform in a certain area and these
drivers’ historical performance, among other things. XXTX generates revenue from providing services to online ride-hailing drivers
to assist them in providing transportation services to the riders looking for taxi/ride-hailing services. XXTX earns commissions for each
completed order as the difference between an upfront quoted fare and the amount earned by a driver based on actual time and distance for
the ride charged to the rider (the “Online Ride-hailing Platform Services”). XXTX settles its commissions with the aggregation
platforms on a weekly basis.
 
The following chart illustrates
our typical process of our ride-hailing platform services:
 

 
During the year ended March
31, 2024, approximately 4.9 million rides with gross fare of approximately $15.1 million were completed through Xixingtianxia and an average
of over 5,000 ride-hailing drivers completed rides and earned income through Xixingtianxia (the “Active Drivers”) each month.
During the year ended March 31, 2024, we earned online ride-hailing platform service fees of approximately $2.5 million, after netting
off approximately $0.3 million incentives paid to Active Drivers.
 
Our executive office is located
in Chengdu City, Sichuan Province, China. Substantially all of our operations are conducted in China. We plan to expand our driver base
for the platform and automobile rental business while strengthening the royalty of the drivers who both lease our cars and use our platform
while expanding, but our platform is available to others.
 


3
 

 
Our Corporate History
 
Senmiao was incorporated in the State of Nevada on June 8, 2017. It
established a wholly owned subsidiary, Senmiao Consulting in China in July 2017. Sichuan Senmiao, a majority owned subsidiary of Senmiao
Consulting, was established in China in June 2014. Senmiao Consulting provided services to Sichuan Senmiao, pursuant to a series of contractual
arrangements (the “VIE Agreements”) with Sichuan Senmiao and each of its equity holders. Senmiao Consulting became the primary
beneficiary of Sichuan Senmiao. The contractual arrangements had been in place since the establishment of Senmiao Consulting (the “Restructuring”).
On March 23, 2022, shareholders with 94.5% equity interests of Sichuan Senmiao and Senmiao Consulting terminated the VIE Agreements. On
March 28, 2022, these shareholders further sold a total of 94.5% equity interests of Sichuan Senmiao to Senmiao Consulting with a total
consideration of zero due to continuous loss. Sichuan Senmiao became the majority owned subsidiary of Senmiao Consulting accordingly.
 
On September 25, 2016, Sichuan
Senmiao acquired a P2P platform (including website, internet content provider (“ICP”) registration, operating systems, servers,
management system, employees and users) from Sichuan Chenghexin Investment and Asset Management Co., Ltd. (“Chenghexin”),
which had established and operated the platform for two years prior to our acquisition (the “Acquisition”), for a total cash
consideration of RMB69,690,000 (approximately $10.1 million). Prior to the Acquisition, Sichuan Senmiao was a holding company that owned
a 60% equity interest in an equity investment fund management company. Sichuan Senmiao sold its 60% equity interest for a cash consideration
of RMB60 million (approximately $8.9 million) immediately following the Acquisition, in order to focus on the online marketplace lending
business. We ceased the online lending services business in October 2019.
 
On November 21, 2018, Senmiao
entered into an Investment and Equity Transfer Agreement (the “Investment Agreement”) with Hunan Ruixi and all the shareholders
of Hunan Ruixi, pursuant to which Senmiao acquired an aggregate of 60% of the equity interest of Hunan Ruixi with a consideration of zero.
Senmiao closed the acquisition on November 22, 2018 and agreed to make a cash contribution of $6,000,000 to Hunan Ruixi, representing
60% of its registered capital, in accordance with the Investment Agreement. On February 12, 2024, Senmiao, Hunan Ruixi and its other shareholders
entered into a Share Swap Agreement (the “Hunan Ruixi Share Swap Agreement”), pursuant to which, Senmiao purchased 5% equity
interest from other shareholders of Hunan Ruixi at a total purchase price of $472,815, payable in the Company’s shares of common
stock, par value $0.0001 per share at a per share price of the average closing price of a share of common stock reported on the Nasdaq
Capital Market for ten (10) trading days immediately preceding February 1, 2024. On February 27, 2024, the issuance of shares of the Company’s
common stock for this transaction has been completed and on March 28, 2024, the registration procedures for the change in shareholders
was completed. As of the date of this Report, Senmiao has made the cash contributions with aggregated amount of $6,000,000 to Hunan Ruixi.
Hunan Ruixi holds a business license for automobile sales and financial leasing and has been engaged in automobile financial leasing services
and automobile sales since March 2019 and January 2019, respectively.
 
Hunan Ruixi had a wholly
owned subsidiary, Ruixi Leasing, a PRC limited liability company formed in April 2018 with a registered capital of RMB10 million (approximately
$1.5 million). Ruixi Leasing had no operations and was dissolved in June 2022.
 
Hunan Ruixi also owns 35% equity
interest in Jinkailong and used to receive economic benefits of the remaining 65% equity interest through two voting agreements with other
shareholders of Jinkailong. On March 31, 2022, the voting agreements were terminated by other shareholders of Jinkailong and Hunan Ruixi.
As a result, Jinkailong ceased to be a VIE. Jinkailong is an automobile transaction and related services company in Chengdu City, Sichuan
Province, China, which primarily targets drivers in the ride-hailing service sector, focus on automobile operating lease, and facilitates
sales and financing transactions for its clients and provides relevant after-transaction services to them. Although Jinkailong was ceased
from our consolidation scope since March 31, 2022, Huana Ruixi, Corenel and Jiekai continuously provide automobile transaction and related
services similar to Jinkailong in Changsha and Chengdu.
 
In May 2019, Senmiao formed
its wholly owned subsidiary, Yicheng, with a registered capital of $50 million in Chengdu City, Sichuan Province, China. Yicheng obtained
its business licenses for automobiles sale and has engaged in the sales of automobiles since June 2019. Yicheng used to have a license
of financial leasing, which was terminated since June 2022. As of the date of this Report, Senmiao has made contributions in an aggregate
amount of $5,750,000 to Yicheng.
 
On September 11, 2020, Senmiao
Consulting entered into an Investment Agreement relating to XXTX with all the original shareholders of XXTX, pursuant to which Senmiao
Consulting would make an investment of RMB3.16 million (approximately $0.5 million) in XXTX in cash and obtain 51% equity interest accordingly.
As of the date of this Report, the Company had remit approximately full amount of investment to XXTX pertained to above mentioned XXTX
Investment Agreement. On October 23, 2020, the registration procedures for the change in shareholders and registered capital were completed
and XXTX became a majority owned subsidiary of Senmiao Consulting. On February 5, 2021, Senmiao Consulting and all the original shareholders
of XXTX entered into a supplementary agreement related to XXTX’s Investment agreement (the “XXTX Increase Investment Agreement”).
Under the XXTX Increase Investment Agreement, all the shareholders of XXTX agreed to increase the total registered capital of XXTX to
RMB50.8 million (approximately $7.40 million). Senmiao Consulting shall pay another investment amounted to RMB36.84 million (approximately
$5.36 million) in cash in exchange of additional 27.74% of XXTX’s equity interest. As of the date of this Report, the Company had
remitted approximately RMB36.60 million ($5.33 million) to XXTX pertained to above mentioned XXTX Increase Investment Agreement.
 


4
 

 
On October 22, 2021, the Company,
Senmiao Consulting, XXTX and its other shareholders further entered into a Share Swap Agreement (the “XXTX Share Swap Agreement”),
pursuant to which the Company, through Senmiao Consulting, purchased all of the remaining equity interests the original shareholders held
in XXTX at a total purchase price of $3.5 million, payable in the Company’s shares of common stock, par value $0.0001 per share
at a per share price of the average closing price of a share of common stock reported on the Nasdaq Capital Market for ten (10) trading
days immediately preceding the date of the XXTX Share Swap Agreement. On November 9, 2021, the issuance of 533,167 (5,331,667 pre reverse
split) shares of the Company’s common stock for this transaction has been completed and on December 31, 2021, the registration procedures
for the change in shareholders was completed. As a result, XXTX became a wholly-owned subsidiary of Senmiao Consulting.
 
As of the date of this Report,
Senmiao Consulting has made a cumulative capital contribution of RMB40.41 million (approximately $5.60 million) to XXTX and the remaining
amount is expected to be paid before December 31, 2025. As of the date of this Report, XXTX had eight wholly owned subsidiaries and two
of them have operations.
 
In December 2020, Senmiao
Consulting formed a wholly owned subsidiary, Corenel, with a registered capital of RMB10.0 million (approximately $1.6 million) in Chengdu
City, Sichuan Province. Corenel is engaged in automobile operating lease since March 2021.
 
In April 2021, Senmiao
formed Senmiao Technology (Hong Kong), Ltd. (“Senmiao HK”), a limited liability company with a registered capital of
$10,000 in Hong Kong. We hold 99.99% of the equity interests of Senmiao HK. As of the date of this Report, Senmiao HK has no operations.
 
In March 2022, Corenel
and another company in Chengdu formed a subsidiary, Jiekai, with a registered capital of RMB500,000 (approximately $80,000) in Chengdu
City, Sichuan Province. Corenel holds 51% equity interests of Jiekai. Jiekai is engaged in automobile operating lease business since April
2022.
 
Our Corporate Structure
 
The following diagram illustrates
the Company’s corporate structure as of the date of this Report:
 

 


5
 

 
Former Voting Agreements with Jinkailong’s
Other Shareholders
 
Hunan Ruixi entered into
two voting agreements signed in August 2018 and February 2020, respectively, as amended (the “Voting Agreements”),
with Jinkailong and other Jinkailong’s shareholders holding aggregate of 65% equity interest. Pursuant to the Voting Agreements,
all other Jinkailong’s shareholders will vote in concert with Hunan Ruixi on all fundamental corporate transactions in the event
of a disagreement for periods of 20 years and 18 years, respectively, ending on August 25, 2038.
 On March 31, 2022, Hunan
Ruixi entered into an Agreement for the Termination of the Agreement for Concerted Action by Shareholders of Jinkailong (the “Termination
Agreement”), pursuant to which the Voting Agreements mentioned above shall be terminated as of the date of the Termination Agreement.
The termination will not impair the past and future legitimate rights and interests of all parties in Jinkailong. As a result of the Termination
Agreement, we no longer have a controlling financial interest in Jinkailong and have determined that Jinkailong was deconsolidated from
our consolidated financial statements effective as of March 31, 2022. However, as Hunan Ruixi still holds 35% equity interests in Jinkailong,
Jinkailong is our equity investee company since then. As of March 31, 2024, the paid-in capital of Jinkailong was zero.

 
Actual and Potential Impact of Coronavirus
(COVID-19) in China on Our Business
 
Impact on the Automobile Transactions and Related
Services
 
Our Automobile Transactions
and Related Services have been gradually recovering from the adverse impact of COVID-19 pandemic. As of March 31, 2024, 108 online ride-hailing
drivers Hunan Ruixi serviced rendered their automobiles to Hunan Ruixi. For the years ended March 31, 2024 and 2023, we recognized provision
for credit losses of $4,209 and $0, respectively, against receivables from these purchasers served by Hunan Ruixi. As most of the leasing
term of the automobiles we delivered in Changsha in prior periods has come to the end, during the year ended March 31, 2024, the number
of newly rendered automobiles decreased to 0 as compared with 7 during the year ended March 31, 2023. However, our daily cash flow will
be adversely impacted as a result of the unsatisfied collection from the online ride-hailing drivers and our potential guarantee expenditure
pursuant to the financing agreements we guaranteed. Our cash flow has been adversely impacted by local resurgences of COVID-19 in Chengdu,
Changsha and Guangzhou while China kept applying the zero-COVID policy control and prevention measures especially from September to November
2022, which had negative impact on the online ride-hailing market accordingly due to travel restriction. In addition, our automobile purchasers
and lessees may be unable to generate sufficient income to make their monthly rental, which shall have significant negative impact on
our revenue from automobiles leasing. If we experience a widespread default by our automobile purchasers/lessees, our cash flow and results
of operations will be materially and adversely affected. As a consequence, we could face shortfalls in liquidity without extra financing
resources for the foreseeable future and lose the ability to grow our business or may even be required to scale down or restructure our
operations.
 


6
 

 
Impact on the Ride-Hailing Platform Services
 
XXTX commenced the operation
of its online ride-hailing platform since late October 2020 and have witnessed the decrease in online ride-hailing orders in July
2021, November 2021, February 2022, September 2022 and December 2022, when Chengdu, Changsha and Guangzhou reported several confirmed
COVID-19 cases, the local government usually ensured concrete and effective measures to fight against the resurgence, including suspending
some traffic activities in certain medium-risk and high-risk areas. Fewer people took ride-hailing trips as a result and the average daily
rides completed through our platform decreased and our income increased accordingly. Consequently, the income of our Automobile Transaction
and Related Services customers who ran their business through the online ride-hailing platforms also decreased during this period.
 
Any of these factors related
to COVID-19 and other similar or currently unforeseen factors beyond our control could have an adverse effect on our overall business
environment, causing uncertainties in the regions in China where we conduct business, and causing our business to suffer in ways that
we cannot predict and materially and adversely impact our business, financial condition and results of operations.
 
Customers
 
The significant majority
of our Operating Entities’ customers are online ride-hailing drivers. Due to the complexity and difficulty of obtaining registration
of various licenses required for driving an online ride-hailing car, our customers choose to lease automobile from us or become affiliated
with us who offer them a simplified and smooth process to obtain qualified cars for online ride-hailing. The automobile lessees typically
lease automobiles which meet the criteria of cars used for online ride-hailing for their own business in the industry. The automobile
purchasers typically become affiliated with Hunan Ruixi through affiliation agreements pursuant to which Hunan Ruixi, as a qualified management
company, provide them post-transaction management services during the affiliation period, which is usually the same as the term of the
Financing Agreements. The users of Xixingtianxia platform typically use it to view and take customer orders for rides.
 
Our Auto Business Entities
acquire customers through the network of sales teams from third-party and our related party, cooperated lease companies and our own efforts
including online advertising and billboard advertising. Our operating entities also send out fliers and participate in trade shows to
advertise our services. During the year ended March 31, 2024, we serviced over 2,000 customers for our Automobile Transaction and Related
Services. During the year ended March 31, 2024, approximately 4.9 million rides with gross fare of approximately $15.1 million were completed
through our platform orders.
 
Risk Management
 
To mitigate risk associate
with our Automobile Transaction and Related Services and Online Ride-hailing Platform Services, our operating entities conduct assessments
and evaluations of prospective online ride-hailing drivers and leases separately, including identity verification and background checks.
For an online ride-hailing platform driver who uses our platform as well as purchases or leases automobile from our Auto Business Entities,
the assessments typically involve two rounds from our subsidiaries who operate Automobile Transaction and Related Services and Online
Ride-hailing Platform Services, respectively. We believe our manual review and verification process is sufficient for the requirements
of our current operations.
 
Our Operating Entities conduct
an initial screening when they receive an application from a prospective automobile buyer/lessee based on credit reports from People’s
Bank of China (the “PBOC”) and third party credit rating companies, and personal information including residence, ethnicity
group, driving history and involvement in legal proceeding. An automobile buyer/lessee must meet the following preliminary criteria:
 

●be between 18-65 years old;

 

●reside in the mainland of China and have the local residential
identification;

 

●have a driving history of at least three years;

 

●not be subject to on-going legal proceedings or enforcement;

 

●not be listed on a national delinquent debtor’s list;

 

●the value of purchased automobile matches the income of the
candidate.

 


7
 

 
Additionally, our Operating
Entities arrange a simple in-person interview with the applicant where we gather information on marital/family status, income, assets,
borrowing history and default history, if any. This interview is typically conducted by our operating entities’ risk management
staff who will verify the accuracy of information on the prospective driver by cross-checking information provided by the applicant with
other sources. Our Operating Entities will also assess the prospective customer’s potential repayment ability.
 
Applicants with any of the
follow attributes will be rejected:
 

●engaging in illegal or criminal activities;

 

●involvement in pornography, gambling, drug dealing and gangster
activities and experiences;

 

●engaging in usury lending; or

 

●providing fraudulent information.

 
Our Operating Entities also
conduct an assessment and evaluation when they receive an application from a prospective online ride-hailing driver. Under our online
ride-hailing platform’s standards, a qualified driver must meet certain minimum criteria:
 

●have obtained online booking taxi driver’s license
with age of 21 to 60 years old for males; 21 to 55 years old for females;

 

●have a driving history of at least three years with driving
license of (i) A1, A2, A3, B1, B2, C1 and C2 (referring to the different classes of driver’s license in China based on vehicle
types);

 

●must not have committed any hit-and-run accidents;

 

●have no record of dangerous driving, drug use, driving under
alcoholic influence, and violent crime;

 

●have no traffic violation of 12 demerit points or more in
any year of the past three years; and

 

●have not been investigated or disciplined for unlawfully
engaging in taxi services or other passenger transportation operations within the past five years.

 
XXTX’s online ride-hailing
platform also sets criteria for the automobiles used for online ride-hailing business, which need to be completed before the driver commences
to use the automobile for online ride-hailing business:
 

●has obtained online booking taxi transportation certificate
and be registered as “reserved taxi service” with less than 7 seats and local registered number; or in accordance with the
requirements by local government;

 

●has installed vehicle satellite positioning device and emergency
alarm device with driving record function;

 

●motor vehicle driving permit is still in use;

 

●has been covered with compulsory insurance for motor vehicle
traffic accident liability and compulsory insurance for third party liability of motor vehicle, and within the insurance period, or in
accordance with the requirements by local government;

 

●vehicle miles traveled is less than 600,000 km and the service
life is less than 8 years;

 

●other requirements by local government.

 


8
 

 
As for the Cybersecurity
risk assessment as well as the mitigation measure taken by the Company, please refer to the discussion under Item 1C – Cybersecurity
for more details.
 
Post-Financing Services and Collection Monitor
 
The Drivers Management department
and Post Financing Management department of our Auto Business Entities are in charge of monitoring and managing monthly payments by the
purchaser/lessee. Every car purchased or leased through us has a GPS device installed, which helps us locate the car. Our Drivers Management
monitor the daily gross income of our served online ride-hailing drivers through our cooperated online ride-hailing platforms as well
as trace the location of each car at least every day. If there is any indicator such as the driver’s daily income is far behind
the average level or the trajectory is unusual, our Drivers Management department shall contact the driver immediately and deliver the
case to the Post Financing Management department to repose the car if necessary. The Drivers Management also monitor the daily using expenditures
of each car such as the traffic violations penalty and maintenance expenses once a week. The car shall be reposed if the accumulated amount
of those expenses exceeds the threshold. After a car is repossessed, our Auto Business Entities store it in a warehouse and later re-lease
it to new customers or dispose of the automobile in accordance with law and relevant contracts. If our Auto Business Entities are unable
to repossess collateral from a delinquent automobile purchaser/lessee, they may commence a lawsuit against such purchaser/lessee.
 
Competition
 
The online ride-hailing industry
in China is intensively competitive and full of rapid changes in technology, shifting user preferences and frequent introduction of new
services and products. There were approximately 300 automobile financing and leasing companies that provide automobile purchasing and
leasing services to online ride-hailing drivers in Chengdu and Changsha City as of June 2024. We face significant competition primarily
from companies that operate in Chengdu City, such as Sichuan Hengchuang Times Automobile Serving Co., Ltd., and Changsha Zitai Automobile
Leasing Co., Ltd.
 
Meanwhile, Didi Chuxing Technology
Co., Ltd. (“Didi”) takes over 80% market share of the online ride-hailing platforms in China according to the public information.
We choose to cooperate with well-known aggregation platforms to commence our online ride-hailing platform business rather than competing
with Didi directly. As of June 2024, there were approximately 100 companies who operate their own online ride-hailing platforms and have
established business relationships with Gaode in Chengdu and Changsha, our major operation cities and are engaged in the same business
as ours. We face significant competition primarily from platforms that have operation in Chengdu and Changsha City, such as Caocao, Robotaxi
and T3 Chuxing. We expect to have more cooperation with other aggregation platforms in the online ride-hailing industries to have more
competitive advantage in the industry.
 
Many of our competitors are
well-capitalized and offer discounted services, driver incentives, consumer discounts and promotions, innovative service and product offerings,
and alternative pricing models, which may be more attractive to consumers than those that we offer. Further, some of our current or potential
competitors have, and may in the future continue to have, greater resources and access to larger driver and consumer bases in a particular
geographic market. In addition, our competitors in certain geographic markets enjoy substantial competitive advantages such as greater
brand recognition, longer operating histories, better localized knowledge, and more supportive regulatory regimes. As a result, such competitors
may be able to respond more quickly and effectively than us in such markets to new or changing opportunities, technologies, consumer preferences,
regulations, or standards, which may render our products or offerings less attractive. In addition, future competitors may share in the
effective benefit of any regulatory or governmental approvals and litigation victories we may achieve, without having to incur the costs
we have incurred to obtain such benefits.
 
Regulations
 
This section sets forth a
summary of the most significant rules and regulations that affect our business activities in China or the rights of our stockholders
to receive dividends and other distributions from us.
 
Regulations Related to Cybersecurity, Information
Security and Confidentiality of User Information
 
PRC government authorities
have enacted laws and regulations with respect to Internet information security and protection of personal information from any abuse
or unauthorized disclosure. Internet information in China is regulated and restricted from a national security standpoint.
 
The
Ministry of Public Security of the People’s Republic of China (the “MPS”) has promulgated measures that prohibit
use of the Internet in ways that, among other things, result in leaks of government secrets or the spread of socially destabilizing content.
The MPS and its local counterparts have authority to supervise and inspect domestic websites to carry out its measures. Internet information
service providers that violate these measures may have their licenses revoked and their websites shut down.
 


9
 

 
Cybersecurity and Information Security
 
For description of the historical
regulatory landscape of Cybersecurity and Information Security, please refer to pages 15 to 19 in our annual report on Form 10-K for the
fiscal year ended March 31, 2023 filed with the SEC on July 13, 2023, which is incorporate by reference herein.
 
On March 22, 2024, CAC adopted
Regulations to Promote and Standardize Cross-Border Data Flows. The new regulation optimizes and adjusts the outbound data transfer system,
including security assessment for outbound data transfer, cross-border transfer of personal information through concluding standard contract,
and personal information protection certification. The new regulations appropriately relax the conditions for cross-border flow of data
and narrow the scope of data outbound security assessment, so as to facilitate cross-border flow of data and reduce the compliance costs
of enterprises.
  
Personal Information Protection
 
The Several Provisions on
Regulating the Market Order of Internet Information Services, issued by the MIIT on December 29, 2011 and effective on March 15, 2012,
stipulate that internet information service providers may not collect any user personal information or provide any such information to
third parties without the consent of a user, unless otherwise stipulated by laws and administrative regulations. “User Personal
information” is defined as information relevant to the users that can lead to the recognition of the identity of the users independently
or in combination with other information. An internet information service provider must expressly inform the users of the method, content
and purpose of the collection and processing of such user personal information and may only collect such information as necessary for
the provision of its services. An internet information service provider is also required to properly store user personal information,
and in case of any leak or likely leak of the user personal information, the internet information service provider must take immediate
remedial measures and, in severe circumstances, make an immediate report to the telecommunications regulatory authority.
 
The Decision on Strengthening
the Protection of Online Information, issued by the SCNPC on December 28, 2012, and the Order for the Protection of Telecommunication
and Internet User Personal Information, issued by the MIIT on July 16, 2013, stipulate that any collection and use of user personal information
must be subject to the consent of the user, abide by the principles of legality, rationality and necessity and be within the specified
purposes, methods and scope. An internet information service provider must also keep such information strictly confidential, and is further
prohibited from divulging, tampering with or destroying any such information, or selling or proving such information to other parties.
An internet information service provider is required to take technical and other measures to prevent the collected personal information
from any unauthorized disclosure, damage or loss. Any violation of the above decision or order may subject the internet information service
provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancelation of filings, closedown of websites or even
criminal liabilities.
 


10
 

 
With respect to the security
of information collected and used by mobile apps, pursuant to the Announcement of Conducting Special Supervision against the Illegal Collection
and Use of Personal Information by Apps, which was issued by the CAC, the MIIT, the Ministry of Public Security, and the State Administration
for Market Regulation on January 23, 2019, app operators shall collect and use personal information in compliance with the Cybersecurity
Law and shall be responsible for the security of personal information obtained from users and take effective measures to strengthen personal
information protection. Furthermore, app operators shall not force their users to make authorization by means of default settings, bundling,
suspending installation or use of the app or other similar means and shall not collect personal information in violation of laws, regulations
or breach of user agreements. Such regulatory requirements were emphasized by the Notice on the Special Rectification of Apps Infringing
upon User’s Personal Rights and Interests, which was issued by MIIT on October 31, 2019. On November 28, 2019, the CAC, the MIIT,
the Ministry of Public Security and the State Administration for Market Regulation jointly issued the Methods of Identifying Illegal Acts
of Apps to Collect and Use Personal Information. This regulation further illustrates certain commonly seen illegal practices of app operators
in terms of personal information protection.
 
On March 12, 2021, the Secretary
Bureau of the CAC, the General Office of the MIIT, the General Office of the MPS and the General Office of the MSA jointly issued the
Provision on Scope of Necessary Personal Information for Common Types of Mobile Internet Applications, which prescribed the scope of necessary
personal information that may be collected by common applications, include map navigation applications, online car booking applications
and other 37 common applications. For online car booking applications, the necessary personal information includes cell phone numbers
of registered users; rider’s departure place, arrival place, location information, travel track and payment information such as
payment time, payment amount and payment channel. Applications shall not deny users’ access to the basic functional services if
the users do not agree to provide personal information outside those necessary ones.
 
On August 20, 2021, the SCNPC
promulgated the Personal Information Protection Law, which took effect on November 1, 2021. Pursuant to the Personal Information Protection
Law, “personal information” refers to any kind of information related to an identified or identifiable individual as electronically
or otherwise recorded and exclude anonymized information. The processing of personal information includes the collection, storage, use,
processing, transmission, provision, disclosure and deletion of personal information. The Personal Information Protection Law applies
to the processing of personal information of individuals within the territory of the PRC, as well as personal information processing activities
outside the territory of PRC, for the purpose of providing products or services to natural persons located within PRC, for analyzing or
evaluating the behaviors of natural persons located within PRC, or for other circumstances as prescribed by laws and administrative regulations.
A personal information processor may process the personal information of this individual only under the following circumstances: (i) where
consent is obtained from the individual; (ii) where it is necessary for the execution or performance of a contract to which the individual
is a party, or where it is necessary for carrying out human resource management pursuant to employment rules or collective contracts made
and executed in accordance with laws; (iii) where it is necessary for performing a statutory responsibility or statutory obligation; (iv)
where it is necessary in response to a public health emergency, or for protecting the life, health or property of a natural person in
the case of an emergency; (v) where the personal information is processed within a reasonable scope to carry out news reporting, supervision
by public opinions or any other activity for public interest purposes; (vi) where the personal information, which has already been disclosed
by the individual or otherwise legally disclosed, is processed within a reasonable scope; or (vii) any other circumstance as provided
by laws or administrative regulations. In principle, the consent of an individual must be obtained for the processing of his or her personal
information, except under the circumstances of the aforementioned items (ii) to (vii). Where personal information is to be processed based
on the consent of an individual, such consent shall be a voluntary and explicit indication of intent given by such individual on a fully
informed basis. If laws or administrative regulations provide that the processing of personal information shall be subject to a separate
consent or written consent of the individual concerned, such provisions shall prevail. In addition, the processing of the personal information
of a minor under 14 years old must obtain the consent by a parent or a guardian of such minor and the personal information processors
must adopt special rules for processing personal information of minors under 14 years old.
 


11
 

 
In the meantime, the PRC
regulatory authorities have also enhanced the supervision and regulation on cross-border data transmission. For example, on October 29,
2021, the Measures for the Security Assessment of Cross-border Data Transmission (Draft for Comment) were proposed by the CAC for public
comments, which require that any data processor providing important data collected and generated during operations within the PRC or personal
information that should be subject to security assessment according to law to an overseas recipient shall conduct security assessment.
The final Measures was promulgated on July 7, 2022 and was effective on September 1, 2022. The measures provide five circumstances, under
any of which data processors shall, through the local cyberspace administration at the provincial level, apply to the CAC for security
assessment of data cross-border transfer. These circumstances include: (i) where the data to be transferred to an overseas recipient are
personal information or important data collected and generated by operators of critical information infrastructure; (ii) where the data
to be transferred to an overseas recipient contain important data; (iii) where a personal information processor that has processed personal
information of more than one million people provides personal information overseas; (iv) where the personal information of more than 100,000
people or sensitive personal information of more than 10,000 people are transferred overseas accumulatively; or (v) other circumstances
under which security assessment of data cross-border transfer is required as prescribed by the CAC. As of the date of this Report, the
above measures have not been formally adopted, and substantial uncertainties still exist with respect to the enactment timetable, final
content, interpretation and implementation of these measures and how they will affect our business operation.
 
Our Chinese subsidiaries
and affiliates have incurred, and will continue to incur, significant expenses in an effort to comply with cybersecurity and information
security standards and protocols imposed by law, regulation, industry standards or contractual obligations to the date of this Report
in all material respects. However, changes in existing laws or regulations or adoption of new laws and regulations relating to cybersecurity
and information security, particularly any new or modified laws or regulations that require enhanced protection of certain types of data
or new obligations with regard to data retention, transfer or disclosure, could greatly increase the cost to us of providing our service
offerings, require significant changes to our operations or even prevent us from providing certain service offerings in jurisdictions
in which we currently operate or in which we may operate in the future.
 
Regulations Related to Online Ride-Hailing
Services
 
Our ride hailing business
is regulated by certain laws and regulations relating to online ride hailing services. As a ride hailing platform, we are required to
obtain permits for an online ride hailing business in the cities in China where we operate such a business, and specific licenses and
permits are also required for the drivers and vehicles on our platform engaged in our ride hailing business.
 
In order to manage the rapidly
growing online ride-hailing service market and control relevant risks, on July 27, 2016, seven ministries and commissions, including
the Ministry of Transport (the “MOT”), jointly promulgated the Interim Measures for the Administration of Online Taxi Booking
Business Operations and Services, which was amended on December 28, 2019 and November 30, 2022, which legalizes online
ride-hailing services such as XXTX and requires the online ride-hailing services to meet the requirements set out by the Interim Measures
and obtain requisite service licenses and take full responsibility of the ride services to ensure the safety of riders. According to the
Interim Measures, (i) the competent transport department of the State Council shall be responsible for guiding the administration of online
ride hailing services nationwide, (ii) the competent transport department of the government of a province or an autonomous region shall
be responsible for guiding the administration of online ride hailing services within its respective administrative region, and (iii) the
competent transport department of a municipality directly under the central government, a city divided into districts, a county, or other
competent administrative department designated by the government shall be responsible for the specific administration of online ride hailing
service. Before carrying out online ride hailing services, an online ride hailing service platform must obtain a permit for the online
ride hailing business and complete the record filing of internet information services with the provincial communications administration
in the place of its enterprise registration. Such platform must be capable of exchanging and processing the relevant information and data
with its servers located within the PRC, establish a sound operational management system, work safety management system and service quality
assurance system, and fulfill other conditions as prescribed. Platforms that conduct the online ride hailing business without obtaining
the necessary permit may be subject to an order of correction, a warning by the local authority, a fine of RMB10,000 (US$1,384) to RMB30,000
(US$4,155), or even criminal liabilities if a violation constitutes a crime. Vehicles used for online ride hailing services must also
satisfy certain conditions in order to obtain the transportation permit for vehicles used for online ride hailing services, including,
among others, installation of satellite navigation system and emergency alarm devices, and meeting certain operational safety criteria.
The Interim Measures also impose certain requirements on drivers engaged in online ride hailing services, including, among others, a driving
experience of more than three years and no transport or driving related or violent criminal offense or violent crime record. Drivers must
meet the prescribed conditions and pass the relevant exams before they can obtain the driver’s license for online ride hailing services.
Platforms may be subject to an order of correction and a fine of RMB5,000 (US$692) to RMB10,000 (US$1,384), and in severe cases a fine
of RMB10,000 (US$1,384) to RMB30,000 (US$4,155), if the relevant vehicle or driver providing the online ride hailing services has not
obtained the applicable permit. Furthermore, the Interim Measures also provide that competent local governmental authorities may formulate
detailed implementing rules for their respective regions in accordance with the Interim Measures and in light of local conditions.
 


12
 

 
Following the promulgation
of the Interim Measures, various local governmental authorities have promulgated implementing rules to further stipulate the detailed
requirements for online ride hailing service platforms, vehicles and drivers, including the major cities of our operations. On November 5,
2016, the Municipal Communications Commission of Chengdu City and a number of municipal departments jointly issued the Implementation
Rules for the Administration of Taxi Management Services for Chengdu Network, which was replace by the one promulgated on July 26,
2021. On August 10, 2017, the Transportation Commission of Chengdu further issued guidelines on compliance requirements for online
ride-hailing businesses, including Working Process for the Online Appointment of Taxi Drivers Qualification Examination and Issuance and
Online Appointment Taxi Transportation Certificate Issuance Process. On November 28, 2016, Guangzhou Municipal People’s Government
promulgated Interim Measures for the Management of Online Ride Hailing Operation and Service in Guangzhou, as amended on November 14,
2019. On July 23, 2018, the General Office of Changsha Municipal People’s Government issued the “Detailed Rules for
the Administration of Online Booking Taxi Management Services for Changsha”. On June 12, 2019, the Municipal Communications Commission
of Changsha City further issued “Transfer and Registration Procedures of Changsha Online Booking of Taxi”. According to these
regulations and guidelines, three licenses or certificates are required for operating the online ride-hailing business: (1) online
ride-hailing service platforms such as XXTX is required to obtain the online reservation taxi operating license; (2) automobiles
used for online ride-hailing are required to obtain the online reservation taxi transport certificate (the “automobile certificate”);
(3) online ride-hailing drivers are required obtain the online reservation taxi driver’s license (the “driver’s license”).
Those regulations also stipulate a series of detailed requirements for the online ride-hailing platforms, drivers and automobiles in different
cities.
 
In addition to the national
online reservation taxi operating license, XXTX and its subsidiaries also obtained the local online reservation taxi operating license
in Chengdu and Changsha, the two major cities, and other 27 cities from April 2020 to June 2024, issued by local authorities, to operate
the online ride-hailing platform services. Without a requisite automobile certificate or driver’s license, ride-hailing drivers
may be suspended from providing online ride-hailing services, their illegal income may be confiscated and they may be subject to fines
amounting to RMB200 (US$28) to RMB2,000 (US$277) for each offense.
 
However, approximately 25%
of our online ride-hailing drivers had not obtained the driver’s license as of March 31, 2024 while all of the cars used for online
ride-hailing services which we provided management services to have the automobile certificate. Without requisite automobile certificate
or driver’s license, these drivers may be suspended from providing online ride-hailing services, confiscated their illegal income
and subject to fines of up to 10 times of their illegal income.
 
Furthermore, according to
the Interim Measures, no enterprise or individual is allowed to provide information form online ride-hailing services to unqualified vehicles
and drivers. During the year ended March 31, 2024, we have been fined by approximately $76,000 by Traffic Management Bureaus in Chengdu,
Changsha, Guangzhou and Tianjin, of which, approximately $30,000 was further compensated by drivers or cooperated third parties. If we
are deemed in serious violation of the Interim Measures, our Online Ride-hailing Platform Services may be suspended and the relevant licenses
may be revoked by certain government authorities. We are in the process of assisting the drivers to obtain the required certificate and
license, such as providing registered and training services. However, there is no guarantee that all of the drivers who run their online
ride-hailing business through our platform would be able to obtain all the certificates and licenses.
 
On February 7, 2022, the
MIIT, the MPS and several other governmental authorities jointly promulgated the Notice on Strengthening the Joint Supervision of the
Entire Chain of Online Ride Hailing Industry, which provides that the departments of transportation, telecommunications, public security,
human resources and social security, the People’s Bank of China, taxation, market regulation and internet information shall accelerate
the establishment of a collaborative supervision mechanism led by the transportation department for new forms of transportation at the
provincial and municipal levels, or the joint supervision mechanism. This notice requires relevant governmental authorities to optimize
service processes, strictly control industry access, and urge online ride hailing platforms not to grant access to drivers and vehicles
with no valid licenses. In case certain violations by online ride hailing platforms trigger the supervisions of various governmental authorities
or different provinces and have serious adverse impacts, the relevant authorities of the State Council may organize joint regulatory talks
and urge the online ride hailing platforms to rectify. If the online ride hailing platforms commit serious violations but refuse to rectify,
the relevant governmental authorities of the municipal level or above may initiate joint supervision and report such violations to the
inter-ministerial joint meeting mechanism, and the Ministry of Transport shall take the lead and work together with the CAC, the MIIT,
the MPS and other governmental authorities, or instruct their relevant local counterparts, to take measures in accordance with laws, including
ordering online ride hailing platforms to suspend services in the region, suspend the release of apps or take down the apps, etc. According
to this notice, the joint supervision mechanism shall apply to certain violations of laws and regulations by online ride hailing platforms,
which include (i) engaging in online ride hailing business or in a disguised form without obtaining the permit for online ride hailing
business; (ii) failing to secure that the vehicles and drivers providing services have relevant licenses and professional qualifications,
dispatching orders to drivers and vehicles that have not obtained the corresponding licenses, failing to transmit relevant data information
to online ride hailing supervision information exchange platform as required or other serious violations of laws and regulations occurring
in the process of operating online ride hailing business; (iii) low-price dumping, fraud, and unreasonably differential treatment of individuals
in terms of transaction conditions; (iv) endangering network security, data security, or infringing on the rights and interests of users’
personal information; (v) illegal operation of payment and settlement business; (vi) serious infringement of the labor security rights
and interests of the drivers; (vii) failure to pay taxes in accordance with the law; and (viii) other serious violations that endanger
public interests, disrupt social order, and affect social security and stability.
 


13
 

 
Regulations Related to Financial Leasing
 
In September 2013, the
Ministry of Commerce of the People’s Republic of China (the “MOFCOM”) issued the Administration Measures of Supervision
on Financing Lease Enterprises (the “Leasing Measures”), to regulate and administer the business operations of financial leasing
enterprises. According to the Leasing Measures, financial leasing enterprises are allowed to carry out financial leasing businesses in
such forms as direct lease, sublease, sale-and-lease-back, leveraged lease, entrusted lease and joint lease in accordance with the provisions
of relevant laws, regulations and rules. However, the Leasing Measures prohibit financial leasing enterprises from engaging in financial
businesses such as accepting deposits, and providing loans or entrusted loans. Without the approval from relevant authorities, financial
leasing enterprises may not engage in inter-bank borrowing and other businesses. In addition, financial leasing enterprises are prohibited
from carrying out illegal fund-raising activities in the name of financial leases. The Leasing Measures require financial leasing enterprises
to establish and improve their financial and internal risk control systems, and a financial leasing enterprise’s risk assets may
not exceed ten times that of its total net assets.
 
In April 2018, China Banking
and Insurance Regulatory Commission, currently known as the National Financial Regulatory Administration of China (the “NFRAC”)
took over the authority over supervision of financing lease companies from MOFCOM.
 
On May 26, 2020, NFRAC
issued the Interim Measures for Supervision and Administration of Financial Leasing Companies (the “Financial Leasing Measures”),
which clarified the business scope, the scope of the leased property and the prohibited business or activity of the financial leasing
company, as well as other business-related definitions, such as purchase, registration, retrieval and value management of financial leasing
products. Financial leasing companies may conduct some or all of the following businesses: (1) financial leasing business; (2) leasing
business; (3) purchase, disposal of residual value and repair of leased assets related to financial leasing and leasing business,
consulting of the leasing transaction, receipt of leasing deposit; (4) transfer of financial leases or leased assets or acceptance
of financial leases or leased assets transferred; (5) fixed income securities investment business. The measures have also discussed
certain regulatory standards, including the proportion of financial leasing assets, the proportion of fixed income securities investment
business, business concentration and so on. Financial leasing companies shall not conduct the following businesses or activities: (1) illegal
fund-raising, acceptance or disguised acceptance of deposits; (2) extension of loans or entrusted loans; (3) placements with
or from other financial leasing companies or in disguise; (4) financing or transferring assets through Internet Lending Information
Intermediaries, private equity funds; (5) other businesses or activities prohibited by laws and regulations, the NFRAC and local
financial regulatory authorities in provinces, autonomous regions and municipalities.
 
The Financial Leasing Measures
clarify and enumerate the scopes of the financing lease business activities, the leased properties and the activities prohibited to be
conducted by the financing lease companies, and set forth the regulatory indexes applicable to financing lease companies including, among
others, (i) the assets for financial leasing and other lease arrangements accounting for not less than 60% of the total assets of a financial
leasing company; (ii) the risk assets of a financing lease company not exceeding eight times of its total net assets, and the term “risk
assets” of a financing lease company refers to its total assets, net of cash, bank deposits, Chinese treasury bonds; (iii) the fixed-income
securities investment business carried out by a financial leasing company not exceeding 20% of its net assets. The Financial Leasing Measures
also requires financial leasing companies should comply with the following regulatory indicators: (1) degree of concentration of
single client financing, meaning the balance of all financial leasing business of a financial leasing company to a single lessee shall
not exceed 30% of its net assets; (2) degree of concentration of single group client financing, meaning the balance of all financial
leasing business of a financial leasing company to a single group shall not exceed 50% of its net assets; (3) ratio of a single related
client, meaning the balance of all financial leasing business of a financial leasing company to a related party shall not exceed 30% of
its net assets; (4) ratio of all related parties, meaning the balance of all financial leasing business of a financial leasing company
to all related parties shall not exceed 50% of its net assets, and (5) ratio of a single related shareholder, meaning the financing
balance to a single shareholder and all its related parties shall not exceed the shareholder’s capital contribution in the financial
leasing company, and at the same time meet the provisions of the measures on the ratio of a single related client. The NFRAC may make
adjustments to the above indicators according to regulatory needs.
 
Financial leasing companies
that were established before the implementation of the Interim Measures for the Supervision and Administration of Financial Leasing Companies
are required meet the requirements stipulated in the Measures within the transition period prescribed by the provincial local financial
supervision department. In principle, the transition period shall not exceed three years. Provincial local financial supervision departments
can appropriately extend the transition period arrangement according to the actual situation of specific industries.
 


14
 

 
The PRC Civil Code promulgated
by the National People’s Congress effective from January 1, 2021 regulates the civil contractual relationship among natural
persons, legal persons and other organizations. Chapter 15 of the PRC Civil Code sets forth related rules about financing lease contracts
including that financing lease contracts shall be in written form and normally include terms such as the name, quantity, specifications,
technical performance and inspection method of the leased property, the lease term, the composition, payment term, payment method and
currency of the rent and the ownership of the leased property upon expiration of the lease. The PRC Civil Code further provides that the
lessor and the lessee may agree on the ownership of the leased property upon expiry of the lease term. If the ownership of the leased
property is not or is not clearly agreed between the parties, and is still cannot be determined pursuant to the PRC Civil Code, the leased
property shall be owned by the lessor.
 
As of the date of this Report,
Hunan Ruixi, our proprietary financing lease subsidiary, has utilized our own capital to fund financing leases to automobile purchasers.
Hunan Ruixi has not complied with all the requirements stipulated under the Financial Leasing Measures and intends to rectify and to comply
with all the requirements stipulated under the Financial Leasing Measure during the transition period, failing which, Hunan Ruixi cannot
carry out financial leasing business.
 
Regulation Related to Financing Guarantee
Companies
 
The State Council of China
promulgated the Regulations on the Administration of Financing Guarantee Companies on August 2, 2017, and on April 2, 2018,
the NFRAC, together with several other governmental authorities, jointly adopted four supplemental rules over the Administration
of Financing Guarantee Companies: (i) the Administrative Measures for the Financing Guarantee Business Permit, (ii) Measures
for Measuring the Outstanding Amount of Financing Guarantee Liabilities, (iii) Administrative Measures for the Asset Percentages
of Financing Guarantee Companies and (iv) Guidelines on Business Cooperation between Banking Financial Institutions and Financing
Guarantee Companies, or the Four Supporting Measures of the Financing Guarantee Rules. In addition, the NFRAC, together with several other
governmental authorities, jointly issued the Supplementary Provisions on the Supervision and Administration of Financing Guarantee Companies
on October 9, 2019.
 
According to the above rules on
financing guarantee companies, or the Financing Guarantee Rules, “financing guarantee” refers to the activities that guarantors
provide guarantee to the guaranteed parties as to loans, bonds or other types of debt financing, including, among other things, the activities
whereby a guarantor provides guarantee for loans, online lending, financial leasing, commercial factoring, bill acceptance, letters of
credit or other forms of debt financing. “Financing guarantees companies” refer to companies legally established and engaged
in financing guarantee business. According to those rules, the establishment of a financing guarantee company is subject to the approval
by the competent government authority, and unless otherwise stipulated, no entity may operate financing guarantee business without such
approval. If any entity violates these regulations and operates financing guarantee business without approval, the entity may be subject
to penalties including ban or suspension of business, fines of RMB500,000 to RMB1,000,000, and confiscation of illegal gains, if any.
If the violation constitutes a criminal offense, criminal liability will be imposed in accordance with the law.
 
In connection with our historical
automotive financing facilitation business, Hunan Ruixi provided guarantees to our financing partners in connection with the financing
of the purchase of automobiles and such guarantee business is not our principal business, which had no significant impact on our operation
result. It is uncertain whether this practice would be deemed as operations in financing guarantee business. See “Risk—Risks
Relating to Our Industry and Business—We are required to obtain certain licenses and permits for our business operations, and we
may not be able to obtain or maintain such licenses or permits.”
 
Regulations Related to Value-Added Telecommunication
Business Certificates and Foreign Investment Restrictions
 
Among all of the applicable
laws and regulations, the Telecommunications Regulations of the People’s Republic of China, or the Telecom Regulations, promulgated
by the PRC State Council in September 25, 2000 and amended on July 29, 2014 and February 6, 2016, respectively, is the primary governing
law, and sets out the general framework for the provision of telecommunications services by domestic PRC companies. Under the Telecom
Regulations, telecommunications service providers are required to procure operating licenses prior to their commencement of operations.
The Telecom Regulations distinguish “basic telecommunications services” from “value-added telecommunications services”,
or “VATS”. VATS are defined as telecommunications and information services provided through public networks, and are further
divided into Class I VATS and Class II VATS. The Telecom Catalogue was issued as an attachment to the Telecom Regulations to categorize
telecommunications services as either basic or value-added. The Telecom Catalogue was most recently updated in June 2019, categorizing
online data and transaction processing, information services, among others, as Class II VATS.
 


15
 

 
The Administrative Measures
on Telecommunications Business Operating Licenses, promulgated by the MIIT in 2009 and most recently amended in July 2017, which set forth
more specific provisions regarding the types of licenses required to operate VATS, the qualifications and procedures for obtaining such
licenses and the administration and supervision of such licenses. Under these regulations, a commercial operator of VATS must first obtain
a VATS License, from the MIIT or its provincial level counterparts, otherwise such operator might be subject to sanctions including corrective
orders and warnings from the competent administration authority, fines and confiscation of illegal gains and, in the case of significant
infringements, the websites may be ordered to close.
 
According to the Special
Entry Management Measures (Negative List) for the Access of Foreign Investment (2021 version) and the Administrative Regulations on Foreign-Invested
Telecommunications Enterprises, which were most recently amended by the State Council on April 7, 2022 and took effect on May 1, 2022,
the equity interest of foreign investors in value-added telecommunications enterprises that are open for foreign investment according
to China’s WTO commitment may not exceed 50%, except as otherwise stipulated by the state. Foreign investment in entities holding
VATS Licenses for internet data center services, content delivery network services, domestic internet protocol virtual private network
services and internet access services, which are not open for foreign investment according to China’s WTO commitment, are generally
prohibited, except that qualified telecommunication service providers incorporated in Hong Kong or Macau may hold up to 50% equity interest
in such entities according to the Mainland and Hong Kong Closer Economic Partnership Agreement or the Mainland and Macao Closer Economic
Partnership Agreement, respectively. From May 1, 2022, the amended Administrative Regulations on Foreign-Invested Telecommunications Enterprises
canceled the qualification requirement on the primary foreign investor in a foreign invested value-added telecommunications enterprise
for having a good track record and operational experience in the value-added telecommunications industry as stipulated in the previous
version.
 
Meanwhile, the Circular of
Ministry of Industry and Information Technology Concerning Lifting Restrictions on the Proportion of Foreign Equity in Online Data Processing
and Transaction Processing Business (E-commerce) (the “Circular 196”), which was promulgated on June 19, 2015, provides that
foreign investors are permitted to invest up to 100% of the registered capital in a foreign-invested telecommunication enterprise engaging
in the operation of online data processing and transaction processing (E-commerce). However, foreign investors are only permitted to invest
up to 50% of the registered capital in a foreign-invested telecommunication enterprise that engages in the operation of Internet information
services. While Circular 196 permits foreign ownership, in whole or in part, of online data and deal processing businesses (E-commerce),
a sub-set of value-added telecommunications services, it is not clear whether our online ride-hailing platform would be deemed as online
data and deal processing. See “Risk Factors — Risks Related to Doing Business in China — We
may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies,
and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business
and results of operations.”
 
Regulations Related to Internet Advertising
 
The Measures for Administration
of Internet Advertising (the “Internet Advertising Measures”), were adopted by the MSA and became effective on May 1, 2023.
The Internet Advertising Measures regulate Internet advertising activities. According to the Internet Advertising Measures, Internet advertisers
are responsible for the authenticity of the content of advertisements. The identity, administrative license, cited information and other
certificates that advertisers are required to obtain in publishing Internet advertisements shall be true and valid. Internet advertisements
shall be distinguishable and prominently marked as “advertisements” in order to enable consumers to identify them as advertisements.
Publishing and circulating advertisements through the Internet shall not affect the normal use of the Internet by users. It is not allowed
to induce users to click on the content of advertisements by any fraudulent means, or to attach advertisements or advertising links in
the emails without permission. The Internet Advertising Measures also impose several restrictions on the forms of advertisements and activities
used in advertising. “Internet advertising” as defined in the Internet Advertising Measures refers to commercial advertisements
that directly or indirectly promote goods or services through websites, web pages, Internet applications or other Internet media in various
forms, including texts, pictures, audio clips and videos. Where Internet advertisements are not identifiable and marked as “advertisements”,
a fine of not more than RMB100,000 (US$13,840) may be imposed in accordance with Advertising Law. A fine ranging from RMB5,000 (US$692)
to RMB30,000 (US$4,155) may be imposed for any failure to provide a prominently marked “CLOSE” button to ensure “one-click
closure”. Advertisers who induce users to click on the content of advertisements by fraudulent means or without permission, attach
advertisements or advertising links in the emails shall be imposed a fine ranging from RMB5,000 (US$692) to RMB30,000 (US$4,155). Our
marketplace is in the process of complying with the new Internet Advertising Measures during our advertising activities.
 


16
 

 
Regulations Related to Company Establishment,
Dividend Distribution and Foreign Investment
 
The establishment, operation
and management of corporate entities in China is governed by the Company Law of the PRC (the “Company Law”), which was issued
by the SCNPC and was last amended in December 2023 and will come into effect as from July 1, 2024. The Company Law applies to both PRC
domestic companies and foreign-invested companies. All of our subsidiaries in China are subject to the Company Law. According to the Company
Law, companies established in the PRC are either limited liability companies or joint stock limited liability companies.
 
The establishment procedures, approval procedures, registered capital
requirements, foreign exchange matters, accounting practices, taxation and labor matters of a wholly foreign-owned enterprise are regulated
by the Foreign Investment Law and the Implementing Rules of the PRC Foreign Investment Law (the “Implementing Rules”), which
was approved by the National People’s Congress of China in March 2019 and December 2019, respectively. The PRC Foreign Investment
Law and the Implementing Rules both took effect on January 1, 2020 and replaced three major previous laws on foreign investments in China,
namely, the Sino-foreign Equity Joint Venture Law, the Sino-foreign Cooperative Joint Venture Law and the Wholly Foreign-owned Enterprise
Law, and their respective implementing rules. According to these regulations, foreign-invested enterprises in the PRC may only pay dividends
out of their accumulated profit, if any, determined in accordance with PRC accounting standards and regulations. However, relevant PRC
laws and regulations permit payments of dividends by the Group’s entities incorporated in the PRC only out of their retained earnings,
if any, as determined in accordance with PRC accounting standards and regulations. A PRC company is required to set aside general reserves
of at least 10% of its after-tax profit, until the cumulative amount of such reserves reaches 50% of its registered capital unless the
provisions of laws regarding foreign investment provide otherwise. As of March 31, 2024, the total respective registered capital of all
the Company’s direct subsidiaries was approximately RMB513 million (approximately $71.1 million).
 
In addition, PRC companies
may allocate a portion of their after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion.
These reserves and employee welfare and bonus funds are not distributable as cash dividends. A PRC company may not distribute any profits
until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable
profits from the current fiscal year.
 
As of March 31, 2024, most
of the Company’s subsidiaries incorporated in the PRC have suffered accumulated loss and the Company concluded all the subsidiaries
did not have abilities to transfer a portion of their net assets to the Company either in the form of dividends, loans or advances. Furthermore,
even though the Company currently does not require any such dividends, loans or advances from the PRC entities for working capital and
other funding purposes, the Company may in the future require additional cash resources from them due to changes in business conditions,
to fund future acquisitions and development, or merely to declare and pay dividends or distributions to its shareholders
 
Except for the above, there
is no other restriction under PRC laws and regulations for PRC companies on use of proceeds generated by the Group’s subsidiaries
to satisfy any obligations of the Company, as long as the PRC companies completed all required procedures, including the tax payment certification
and tax declaration.
 
The investment activities
in China of foreign investors are also governed by the Foreign Investment Law and the Implementing Rules. Pursuant to the Foreign Investment
Law, “foreign investments” refer to investment activities conducted by foreign investors (including foreign natural persons,
foreign enterprises or other foreign organizations) directly or indirectly in the PRC, which include any of the following circumstances:
(i) foreign investors setting up foreign-invested enterprises in the PRC solely or jointly with other investors, (ii) foreign investors
obtaining shares, equity interests, property portions or other similar rights and interests of enterprises within the PRC, (iii) foreign
investors investing in new projects in the PRC solely or jointly with other investors, and (iv) investment in other methods as specified
in laws, administrative regulations, or as stipulated by the State Council. The Implementing Rules introduce a see-through principle and
further provide that foreign-invested enterprises that invest in the PRC are also governed by the PRC Foreign Investment Law and the Implementing
Rules.
 


17
 

 
The Foreign Investment Law
and the Implementing Rules provide that a system of pre-entry national treatment and negative list shall be applied for the administration
of foreign investment, where “pre-entry national treatment” means that the treatment given to foreign investors and their
investments at market entry stage is no less favorable than that given to domestic investors and their investments, and “negative
list” means the special administrative measures for foreign investment’s entry to specific fields or industries, which will
be proposed by the competent investment department of the State Council in conjunction with the competent commerce department of the State
Council and other relevant departments, and be reported to the State Council for promulgation, or be promulgated by the competent investment
department or competent commerce department of the State Council after being reported to the State Council for approval. Foreign investments
beyond the negative list will be granted national treatment. Foreign investors shall not invest in the prohibited fields as specified
in the negative list, and foreign investors who invest in the restricted fields shall comply with the special requirements on the shareholding,
senior management personnel, etc. In the meantime, relevant competent government departments will formulate a catalogue of industries
for which foreign investments are encouraged according to the needs for national economic and social development, to list the specific
industries, fields and regions in which foreign investors are encouraged and guided to invest.
 
The current industry entry
clearance requirements governing investment activities in the PRC by foreign investors are set out in two categories, namely the Special
Entry Management Measures (Negative List) for the Access of Foreign Investment (2021 version), or the 2021 Negative List, as promulgated
by the National Development and Reform Commission (the “NDRC”) and the MOFCOM on December 27, 2021 and taking effect on January
1, 2022, and the Encouraged Industry Catalogue for Foreign Investment (2022 version) as promulgated by the NDRC and the MOFCOM on October
26, 2022 and taking effect on January 1, 2023. Industries not listed in these two catalogues are generally deemed “permitted”
for foreign investment unless specifically restricted by other PRC laws. Neither our Automobile Transaction and Related Services nor our
Online Ride-hailing Platform Services is listed in 2021 Negative List.
 
Meanwhile, the PRC Foreign
Investment Law provides that foreign-invested enterprises established according to the existing laws regulating foreign investment may
maintain their structure and corporate governance within five years after the implementing of the Foreign Investment Law. Furthermore,
the PRC Foreign Investment Law provides several protective rules and principles for foreign investors and their investments in the PRC,
including, among others, that a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions,
profits, capital gains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully
acquired, and income from liquidation, among others, within China; local governments shall abide by their commitments to the foreign investors;
governments at all levels and their departments shall enact local normative documents concerning foreign investment in compliance with
laws and regulations and shall not impair legitimate rights and interests, impose additional obligations onto foreign-invested enterprises,
set market access restrictions and exit conditions, or intervene with the normal production and operation activities of foreign-invested
enterprises; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation
shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; and mandatory technology
transfer is prohibited.
 
In addition, pursuant to
the Foreign Investment Law, the Implementing Rules, and the Information Reporting Measures for Foreign Investment jointly promulgated
by the MOFCOM and the MSA, which took effect on January 1, 2020, a foreign investment information reporting system was established and
foreign investors or foreign-invested enterprises must report investment information to competent commerce departments of the PRC government
through the enterprise registration system, the enterprise credit information publicity system and the foreign investment information
reporting system, and the relevant government authorities shall share such investment information to the competent commerce departments
in a timely manner. We are subject to these regulatory requirements.
 


18
 

 
Regulations Relating to Vehicle Rental Services
 
Pursuant to the Administration
Measures for Operations and Services of Small and Micro Passenger Vehicles issued by the Ministry of Transport on December 20, 2020 and
last amended on August 11, 2021, rental business operators of small and micro passenger vehicles shall carry out record-filing procedures
with the city or county level counterparts of the Ministry of Transport where the business operations are conducted, within 60 days after
completing the relevant registration formalities with the local counterparts of the State Administration for Market Regulation, or within
60 days after establishing new service agencies to carry out relevant business activities. To qualify for the record filing procedures,
an applicant entity shall satisfy, among others, the following requirements: (i) being an independent legal person registered under the
PRC law; (ii) the vehicles used for rental business operations passing quality inspections, and the registered nature of these vehicles
being “rental”; (iii) having the business premises and management personnel eligible for the rental business; (iv) establishing
corresponding service institutions and having corresponding service capabilities locally; (v) developing comprehensive operation and management
systems, service procedures, safety management systems, and emergency response plans. Failure to complete the record-filing procedures
may subject the rental business operators of small and micro passenger vehicles to orders to rectify and fines ranging from RMB3,000 (US$416) to RMB10,000 (US$1,384). All vehicles used for our Auto Operating Leasing have obtained the required licenses and
completed the registration.
 
Regulations Related to Labor and Social
Security
 
Pursuant to the PRC Labor
Law, the PRC Labor Contract Law and the Implementing Regulations of the Employment Contracts Law, labor relationships between employers
and employees must be executed in written form. Wages may not be lower than the local minimum wage. Employers must establish a system
for labor safety and sanitation, strictly abide by state standards and provide relevant education to its employees. Employees are also
required to work in safe and sanitary conditions.
 
Under PRC laws, rules and
regulations, including the Social Insurance Law, the Interim Regulations on the Collection and Payment of Social Security Funds and the
Regulations on the Administration of Housing Accumulation Funds, employers are required to contribute, on behalf of their employees, to
a number of social security funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance, occupational
injury insurance, maternity leave insurance and housing accumulation funds. These payments are made to local administrative authorities
and any employer who fails to contribute may be fined and ordered to pay the deficit amount. See “Risk Factors — Risks
Related to Doing Business in China — Failure to make adequate contributions to various employee benefit plans as required
by PRC regulations may subject us to penalties.”
 
Anti-money Laundering Regulation
 
The PRC Anti-money Laundering
Law, which became effective in January 2007, sets forth the principal anti-money laundering requirements applicable to financial
institutions, as well as non-financial institutions with anti-money laundering obligations, including the adoption of precautionary and
supervisory measures, establishment of various systems for client identification, retention of clients’ identification information
and transactions records, and reports on large transactions and suspicious transactions. According to the PRC Anti-money Laundering Law,
financial institutions subject to the PRC Anti-money Laundering Law include banks, credit unions, trust investment companies, stock brokerage
companies, futures brokerage companies, insurance companies and other financial institutions as listed and published by the State Council,
while the list of the non-financial institutions with anti-money laundering obligations will be published by the State Council. The PBOC
and other governmental authorities issued a series of administrative rules and regulations to specify the anti-money laundering obligations
of financial institutions and certain non-financial institutions, such as payment institutions. However, the State Council has not promulgated
the list of the non-financial institutions with anti-money laundering obligations.
 


19
 

 
Regulation Related to the Payment Services of Non-financial Institutions
 
According to Measures for
the Administration of Payment Services of Non-Financial Institutions which were promulgated by PBOC on June 14, 2010, effective on
September 1, 2010 and amended on April 29, 2020, and Implementing Rules for the Measures for the Administration of Payment
Services of Non-Financial Institution which were promulgated by the PBOC, effective on December 1, 2010 and amended on June 2,
2020, the payment services provided by non-financial institutions refer to some or all of the following monetary capital transfer services
provided by the non-financial institutions as intermediary agencies between payers and payees: (1) payment through the internet;
(2) issuance and acceptance of prepaid cards; (3) bankcard acquiring; and (4) other payment services as determined by the
PBOC. Non-financial institutions which provide payment services shall obtain a “Payment Business License” and become a “payment
institution.” Payment Business License is valid for five years from the date of issuance. Payment institutions shall carry out business
activities in compliance with the scope of business approved by the Payment Business License, and shall not outsource any business, transfer,
lease, or lend its Payment Business License. Any non-financial institution or individual shall not directly or indirectly engage in payment
business without the approval of the PBOC.
 
On May 9, 2019, the
MOT, the PBOC, the NDRC, the MPS, the State Administration of Market Regulation (the “SAMR”) and NFRAC, jointly issued the
Measures for the Administration of User Funds in New Forms of Transport Business (Trial) (the “Trial Measures on Administration
of User Funds”) which became effective on June 1, 2019. According to the Trial Measures on Administration of User Funds, an
operating enterprise shall open a special deposit account for user deposits and a special deposit account for prepayments, respectively,
as are nationwide unique at the bank in the place of its registration in mainland China, and the bank where the special deposit accounts
are opened shall be the depository bank to preserve user funds.
 
Regulations on Intellectual Property
 
The PRC has adopted legislation
governing intellectual property rights, including copyrights, trademarks and patents. The PRC is a signatory to major international conventions
on intellectual property rights and is subject to the Agreement on Trade Related Aspects of Intellectual Property Rights as a result of
its accession to the World Trade Organization in December 2001.
 
The SCNPC amended the Copyright
Law in 2001, 2010 and 2020 to widen the scope of works and rights that are eligible for copyright protection. The amended, the Copyright
Law extends copyright protection to Internet activities, products disseminated over the Internet and software products. In addition, there
is a voluntary registration system administered by the China Copyright Protection Center. To address copyright infringement related to
content posted or transmitted over the Internet, the National Copyright Administration and former Ministry of Information Industry jointly
promulgated the Administrative Measures for Copyright Protection Related to the Internet in April 2005. These measures became effective
in May 2005.
 
On December 20, 2001,
the SCNPC promulgated the new Regulations on Computer Software Protection, effective from January 1, 2002, and revised in 2013, which
are intended to protect the rights and interests of the computer software copyright holders and encourage the development of software
industry and information economy. In the PRC, software developed by PRC citizens, legal persons or other organizations is automatically
protected immediately after its development, without an application or approval. Software copyrights may be registered with the designated
agency and if registered, the certificate of registration issued by the software registration agency will be the primary evidence of the
ownership of the copyright and other registered matters. On February 20, 2002, the National Copyright Administration of the PRC introduced
the Measures on Computer Software Copyright Registration, which outline the operational procedures for registration of software copyright,
as well as registration of software copyright license and transfer contracts. The Copyright Protection Center of China is mandated as
the software registration agency.
 
The PRC Trademark Law, adopted
in 1982 and revised in 1993, 2001, 2013 and 2019, respectively, protects the proprietary rights to registered trademarks. The Trademark
Office under the SAIC handles trademark registrations and may grant a term of ten years for registered trademarks, which may be extended
for another ten years upon request. Trademark license agreements shall be filed with the Trademark Office for record. In addition, if
a registered trademark is recognized as a well-known trademark, the protection of the proprietary right of the trademark holder may reach
beyond the specific class of the relevant products or services.
 


20
 

 
The Patent Law of the PRC
and its Implementation Rules provide for three types of patents: invention, utility model and design. The duration of a patent right
is either 10 years or 20 years from the date of application, depending on the type of patent right.
 
Domain names are protected
under the Administrative Measures on Internet Domain Names promulgated by the MIIT on August 24, 2017 and effective as of November 1,
2017. Our domain name registrations are handled through domain name service agencies established under the relevant regulations, and applicants
become domain name holders upon successful registration.
 
Regulations Related to Foreign Exchange
 
The principal regulations
governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, which were most recently amended in
August 2008. Payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions,
can usually be made in foreign currencies without prior approval from the State Administration of Foreign Exchange (“SAFE”)
by complying with certain procedural requirements. By contrast, approval from or registration with appropriate PRC authorities or banks
authorized by appropriate PRC authorities is required where RMB capital is to be converted into foreign currency and remitted out of China
to pay capital expenses.
 
SAFE promulgated the Notice
of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested
Enterprises (“Circular 19”), effective on June 1, 2015, in replacement of SAFE Circular 142 (the Circular on the Relevant
Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested
Enterprises. According to Circular 19, the flow and use of the RMB capital converted from foreign currency-denominated registered capital
of a foreign-invested company is regulated such that RMB capital may not be used for the issuance of RMB entrusted loans or the repayment
of inter-enterprise loans or the repayment of banks loans that have been transferred to a third party. Although Circular 19 allows RMB
capital converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity investments
within the PRC, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of a foreign-invested
company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear whether SAFE will permit such
capital to be used for equity investments in the PRC in actual practice. SAFE promulgated the Notice of the State Administration of Foreign
Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account (the “Circular 16”),
effective on June 9, 2016, which reiterates some of the rules set forth in Circular 19, but changes the prohibition against
using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted
loans to a prohibition against using such capital to issue loans to non-associated enterprises. Violations of SAFE Circular 19 or Circular
16 could result in administrative penalties.
 
From 2012, SAFE has promulgated
several circulars to substantially amend and simplify the current foreign exchange procedure. Pursuant to these circulars, the opening
of various special purpose foreign exchange accounts, the reinvestment of RMB proceeds by foreign investors in the PRC and remittance
of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval
or verification of SAFE. In addition, domestic companies are no longer limited to extend cross-border loans to their offshore subsidiaries
but are also allowed to provide loans to their offshore parents and affiliates and multiple capital accounts for the same entity may be
opened in different provinces. SAFE also promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration
over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration
by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks
shall process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by
SAFE and its branches. In February 2015, SAFE promulgated SAFE Circular 13, which took effect on June 1, 2015. SAFE Circular
13 delegates the power to enforce the foreign exchange registration in connection with inbound and outbound direct investments under relevant
SAFE rules from local branches of SAFE to banks, thereby further simplifying the foreign exchange registration procedures for inbound
and outbound direct investments.
 


21
 

 
On January 26, 2017,
SAFE issued the Notice of State Administration of Foreign Exchange on Improving the Check of Authenticity and Compliance to Further Promote
Foreign Exchange Control (the “SAFE Circular 3”), which stipulates several capital control measures with respect to the outbound
remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks
shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements;
and (ii) domestic entities shall hold income to account for previous years’ losses before remitting the profits. Moreover,
pursuant to SAFE Circular 3, domestic entities shall make detailed explanations of the sources of capital and utilization arrangements,
and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound investment.
 
On October 23, 2019, SAFE
promulgated the Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and
Investment, or Circular 28, which permits non-investment foreign-invested enterprises to use their capital funds to make equity investments
in China, with genuine investment projects and in compliance with effective foreign investment restrictions and other applicable laws.
However, as the Circular 28 was newly issued, there are still substantial uncertainties as to its interpretation and implementations in
practice.
 
Regulations Relating to Offshore Special
Purpose Companies Held by PRC Residents
 
SAFE promulgated the Circular
on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles
(the “SAFE Circular 37”) in July 2014 that requires PRC residents or entities to register with SAFE or its local branch
in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.
In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material
events relating to any change of basic information (including change of such PRC citizens or residents, name and operation term), increases
or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions.
 
SAFE Circular 37 was issued
to replace SAFE Circular 75 (the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing
and Roundtrip Investments via Overseas Special Purpose Vehicles). SAFE further enacted the Notice on Further Simplifying and Improving
the Foreign Exchange Management Policies for Direct Investment (the “SAFE Circular 13”) effective from June 1, 2015,
which allows PRC residents or entities to register with qualified banks in connection with their establishment or control of an offshore
entity established for the purpose of overseas investment or financing. However, remedial registration applications made by PRC residents
that previously failed to comply with the SAFE Circular 37 continue to fall under the jurisdiction of the relevant local branch of SAFE.
In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the
PRC subsidiaries of that special purpose vehicle may be prohibited from distributing profits to the offshore parent and from carrying
out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute
additional capital into its PRC subsidiaries. Moreover, failure to comply with the various SAFE registration requirements described above
could result in liability under PRC law for evasion of foreign exchange controls.
 
See “Risk Factors — Risks
Related to Doing Business in China — PRC regulations relating to offshore investment activities by PRC residents may
limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us or otherwise expose us or our
PRC resident beneficial owners to liability and penalties under PRC law.”
 
SAFE Regulations Relating to Employee Stock
Incentive Plans
 
On February 15, 2012,
SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock
Incentive Plans of Overseas Publicly-Listed Companies (the “Stock Option Rules”), which replaced the Application Procedures
of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plans of Overseas
Publicly-Listed Companies issued by SAFE on March 28, 2007. Under the Stock Option Rules and other relevant rules and regulations,
PRC residents who participate in a stock incentive plan in an overseas publicly listed company are required to register with SAFE or its
local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified
PRC agent, which could be a PRC subsidiary of such overseas publicly listed company or another qualified institution selected by such
PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants.
Such participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options,
the purchase and sale of corresponding shares or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE
registration with respect to our share incentive plans if there are any material changes to the share incentive plans, the PRC agent or
the overseas entrusted institution or other material changes. In addition, SAFE Circular 37 provides that PRC residents who participate
in a share incentive plan of an overseas unlisted special purpose company may register with SAFE or its local branches before exercising
rights. See “Risk Factors — Risks Related to Doing Business in China — Any failure to
comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants
or us to fines and other legal or administrative sanctions.”
 


22
 

 
Regulations Related to Enterprise Income
Tax
 
Under the PRC Enterprise
Income Tax Law (the “EIT Law”), which became effective on January 1, 2008, an enterprise established outside the PRC
with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income
tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. In 2009, the State Administration
of Taxation (the “SAT”) issued the Notice Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises
as PRC Tax Resident Enterprise on the Basis of De Facto Management Bodies (the “SAT Circular 82”), which provides certain
specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated
offshore is located in China. Further to SAT Circular 82, in 2011, the SAT issued the Administrative Measures for Enterprise Income Tax
of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial) (the “SAT Bulletin 45”) to provide more guidance
on the implementation of SAT Circular 82.
 
According to SAT Circular
82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be considered a PRC resident enterprise
by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its worldwide
income only if all of the following conditions are met: (a) the senior management and core management departments in charge of its
daily operations function have their presence mainly in the PRC; (b) its financial and human resources decisions are subject to determination
or approval by persons or bodies in the PRC; (c) its major assets, accounting books, company seals, and minutes and files of its
board of directors and shareholders’ meetings are located or kept in the PRC; and (d) more than half of the enterprise’s
directors or senior management with voting rights habitually reside in the PRC.
 
Although SAT Circular 82
and SAT Bulletin 45 only apply to offshore-incorporated enterprises controlled by PRC enterprises or PRC enterprise groups and not those
controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the SAT’s general position
on how the term “de facto management body” could be applied in determining the tax resident status of offshore enterprises,
regardless of whether they are controlled by PRC enterprises, individuals or foreigners.
 
The State Administration
of Taxation has promulgated several rules and notices to tighten the scrutiny over acquisition transactions in recent years, including
the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises (the “SAT
Circular 698”), the Notice on Several Issues Regarding the Income Tax of Non-PRC Resident Enterprises (the “SAT Circular 24”)
and the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises (the “SAT Bulletin
7”). Pursuant to these rules and notices, if a non-PRC resident enterprise transfers its equity interests in a PRC tax resident
enterprise, such non-PRC resident transferor must report to the tax authorities at the place where the PRC tax resident enterprise is
located and is subject to a PRC withholding tax of up to 10%. In addition, if a non-PRC resident enterprise indirectly transfers so-called
PRC Taxable Properties, referring to properties of an establishment or a place of business in China, real estate properties in China and
equity investments in a PRC tax resident enterprise, by disposition of the equity interests in an overseas non-public holding company
without a reasonable commercial purpose and resulting in the avoidance of PRC enterprise income tax, the transfer will be re-characterized
as a direct transfer of the PRC Taxable Properties and gains derived from the transfer may be subject to a PRC withholding tax of up to
10%. SAT Bulletin 7 has listed several factors to be taken into consideration by the tax authorities in determining if an indirect transfer
has a reasonable commercial purpose. However, regardless of these factors, an indirect transfer satisfying all the following criteria
will be deemed to lack a reasonable commercial purpose and be taxable in the PRC: (i) 75% or more of the equity value of the intermediary
enterprise being transferred is derived directly or indirectly from PRC Taxable Properties; (ii) at any time during the one year period
before the indirect transfer, 90% or more of the asset value of the intermediary enterprise (excluding cash) is comprised directly or
indirectly of investments in the PRC, or 90% or more of its income is derived directly or indirectly from the PRC; (iii) the functions
performed and risks assumed by the intermediary enterprise and any of its subsidiaries that directly or indirectly hold the PRC Taxable
Properties are limited and are insufficient to prove their economic substance; and (iv) the foreign tax payable on the gain derived from
the indirect transfer of the PRC Taxable Properties is lower than the potential PRC tax on the direct transfer of those assets. On the
other hand, indirect transfers falling into the scope of the safe harbors under SAT Bulletin 7 may not be subject to PRC tax. The safe
harbors include qualified group restructurings, public market trades and exemptions under tax treaties.
 


23
 

 
Under SAT Bulletin 7 and
other PRC tax regulations, in the case of an indirect transfer, entities or individuals obligated to pay the transfer price to the transferor
must act as withholding agents and are required to withhold the PRC tax from the transfer price. If they fail to do so, the seller is
required to report and pay the PRC tax to the PRC tax authorities. If neither party complies with the tax payment or withholding obligations
under SAT Bulletin 7, the tax authority may impose penalties such as late payment interest on the seller. In addition, the tax authority
may also hold the withholding agents liable and impose a penalty of 50% to 300% of the unpaid tax on them. The penalty imposed on the
purchasers may be reduced or waived if the withholding agents have submitted the relevant materials in connection with the indirect transfer
to the PRC tax authorities in accordance with SAT Bulletin 7.
 
In January 2019, the SAT
issued Announcement on the Implementation of the Preferential Income Tax Reduction Policy for Small and Low Profit Enterprises (the “SAT
2019 Circular 2”). Pursuant to SAT 2019 Circular 2, from January 1, 2019 to December 31, 2021, for small low profit enterprises,
(i) the tax rate for the first RMB1 million the annual income does not exceed RMB1 million is 20% and the taxable income is 25% of the
annual taxable income; (ii) the tax rate for the portion of annual income that exceeds RMB1 million but does not exceed RMB3 million is
20% and the taxable income is 50% of the annual income. SAT 2019 Circular 2 also defines “small low profit enterprises” as
enterprises who are engaged in industries not restricted or prohibited and meet the three conditions of (i) annual taxable income of RMB3
million or lower, (ii) employees’ number of 300 or lower; and (iii) total assets of RMB50 million or lower. On March 18, 2022, the
SAT issued Announcement on the Further Implementation of the Preferential Income Tax Reduction Policy for Small and Low Profit Enterprises
(the “SAT 2022 Circular 13”). Pursuant to SAT 2022 Circular 13, the preferential income tax reduction policy for small low
profit enterprise shall be expanded from January 1, 2022 to December 31, 2024. During the calendar years ended December 31, 2022 and 2023,
all our subsidiaries in China met the three criteria and enjoyed the preferential tax rates.
 
Regulations Related to PRC Value-Added Tax
 
In March 2016, the Ministry
of Finance and the State Administration of Taxation further promulgated the Notice on Fully Promoting the Pilot Plan for Replacing Business
Tax by Value-Added Tax (“VAT”), which became effective on May 1, 2016. Pursuant to the pilot plan and relevant notices,
VAT is generally imposed in lieu of business tax in the modern service industries, including the value-added telecommunication services,
on a nationwide basis. VAT of a rate of 6% applies to revenue derived from the provision of some modern services. Certain small taxpayers
under PRC law are subject to reduced value-added tax at a rate of 3%. Unlike business tax, a taxpayer is allowed to offset the qualified
input VAT paid on taxable purchases against the output VAT chargeable on the modern services provided.
 
On April 4, 2018, the
Ministry of Finance and the State Administration of Taxation issued the Notice on Adjustment of VAT Rates, which came into effect on May 1,
2018. According to the abovementioned notice, the taxable goods previously subject to VAT rates of 17% and 11% respectively become subject
to lower VAT rates of 16% and 10% respectively starting from May 1, 2018. Furthermore, according to the Announcement on Relevant
Policies for Deepening Value-added Tax Reform jointly promulgated by the Ministry of Finance, the State Administration of Taxation and
the General Administration of Customs, which became effective on April 1, 2019, the taxable goods previously subject to VAT rates
of 16% and 10% respectively become subject to lower VAT rates of 13% and 9% respectively starting from April 1, 2019.
 
Pursuant to applicable PRC
regulations promulgated by the Ministry of Finance of China and the SAT, we are required to pay a VAT at a rate of 6% for our services
and 13% for our automobile sales, operating lease and financial leasing, with respect to revenues derived from the provision of Automobile
Transaction and Related Services. In addition, as part of the Chinese government’s effort to ease the burden of businesses affected
by COVID-19, the Ministry of Finance and the State Administration of Taxation temporarily reduced or exempted VAT on revenues derived
from the provision of certain transportation services from January 2020 to March 2021 and from January 1, 2022 to December 31, 2022. During
the fiscal year ended March 31, 2023, our revenues generated from our Online Ride-hailing Platform Services was exempted from duty since
April 1, 2022 to December 31, 2022. A taxpayer is allowed to offset the qualified input VAT paid on taxable purchases against the output
VAT chargeable on the revenue from services provided.
 


24
 

 
Regulations Related to Mergers and Acquisitions
 
On August 8, 2006, six
PRC regulatory agencies, including China Securities Regulatory Commission (the “CSRC”), promulgated the Regulations on Mergers
and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”), which became effective on September 8,
2006 and were amended on June 22, 2009. The M&A Rules, among other things, require offshore special purpose vehicles formed for
overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC domestic enterprises or individuals to
obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. On September 21, 2006,
the CSRC published a notice specifying the documents and materials that are required to be submitted for obtaining CSRC approval.
 
The M&A Rules, and other
recently adopted regulations and rules concerning mergers and acquisitions established additional procedures and requirements that
could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require
that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise,
if (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national
economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark
or PRC time-honored brand. Moreover, the Anti-Monopoly Law promulgated by the SCNPC on August 30, 2007 and effective as of August 1,
2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared
by MOFCOM before they can be completed. In addition, on February 3, 2011, the General Office of the State Council promulgated a Notice
on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “Circular
6”), which officially established a security review system for mergers and acquisitions of domestic enterprises by foreign investors.
Further, on August 25, 2011, MOFCOM promulgated the Regulations on Implementation of Security Review System for the Merger and Acquisition
of Domestic Enterprises by Foreign Investors (the “MOFCOM Security Review Regulations”), which became effective on September 1,
2011, to implement Circular 6. Under Circular 6, a security review is required for mergers and acquisitions by foreign investors having
“national defense and security” concerns and mergers and acquisitions by which foreign Investors may acquire the “de
facto control” of domestic enterprises with “national security” concerns. Under the MOFCOM Security Review Regulations,
MOFCOM will focus on the substance and actual impact of the transaction when deciding whether a specific merger or acquisition is subject
to security review. If MOFCOM decides that a specific merger or acquisition is subject to security review, it will submit it to the Inter-Ministerial
Panel, an authority established under Circular 6 led by the NDRC and MOFCOM under the leadership of the State Council, to carry out the
security review. The regulations prohibit foreign investors from bypassing the security review by structuring transactions through trusts,
indirect investments, leases, loans, control through contractual arrangements or offshore transactions. There is no explicit provision
or official interpretation stating that the merger or acquisition of a company engaged in the marketplace lending business requires security
review.
 
Regulations Related to Overseas Listings
 
On February 17, 2023, the
CSRC promulgated the Overseas Listing Trial Measures (the “Trial Measures”), and relevant five guidelines on the application
of regulatory rules, which took effect from March 31, 2023, requiring Chinese domestic companies’ overseas offerings and listings
of equity securities be filed with the CSRC. On the same date, the CSRC circulated Supporting Guidance Rules No. 1 through No. 5, Notes
on the Trial Measures, Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises and relevant
CSRC Answers to Reporter Questions, or collectively, the Guidance Rules and Notice, on CSRC’s official website. The Trial Measures
clarify the scope of overseas offerings and listings by Chinese domestic companies which are subject to the filing and reporting requirements
thereunder, and provide, among others, that Chinese domestic companies that have already directly or indirectly offered and listed securities
in overseas markets prior to the effectiveness of the Overseas Listing Trial Measures shall fulfil their filing obligations and report
relevant information to the CSRC within three working days after conducting a follow-on offering of equity securities on the same overseas
market, and follow the relevant reporting requirements within three working days upon the occurrence and public disclosure of any specified
circumstances provided thereunder, including (i) change of control; (ii) investigations or sanctions imposed by overseas securities regulatory
agencies or other relevant competent authorities; (iii) change of listing status or transfer of listing segment and (iv) voluntary or
mandatory delisting. In addition, where the main business of an issuer undergoes material change after overseas offering and listing,
and is therefore beyond the scope of business stated in the filing documents, such issuer shall follow the relevant reporting requirements
within three working days after occurrence of the changes. Any future securities offerings and listings outside mainland China by Chinese
domestic companies, including but not limited to follow-on offerings, secondary listings and going private transactions, will be subject
to the filing with the CSRC under the Overseas Listing Trial Measures. For violations of these provisions or measures, the competent Chinese
authorities may impose administrative regulatory measures, such as orders for correction, warnings, fines, and may pursue legal liability
in accordance with law.
 


25
 

 
The Trial Measures, together with the Guidance Rules and Notice prescribe
that, amongst others: (1) criteria to determine whether an issuer will be required to go through the filing procedures under the Trial
Measures; (2) exemptions from immediate filing requirements for issuers including those that have already been listed in foreign securities
markets, including U.S. markets, prior to the effective date of the Trial Measures, but these issuers shall still be subject to filing
procedures if they conduct refinancing or are involved in other circumstances that require filing with the CSRC; (3) a negative list of
types of issuers banned from listing or offering overseas, such as issuers whose affiliates have been recently convicted of bribery and
corruption; (4) issuers’ compliance with web security, data security, and other national security laws and regulations; (5) issuers’
filing and reporting obligations, such as obligation to file with the CSRC after it submits an application for initial public offering
to overseas regulators, and obligation after offering or listing overseas to file with the CSRC after it completes subsequent offerings
and to report to the CSRC material events including change of control or voluntary or forced delisting of the issuer; and (6) the CSRC’s
authority to fine both issuers and their relevant shareholders for failure to comply with the Trial Measures, including failure to comply
with filing obligations or committing fraud and misrepresentation.
 
The Overseas Listing Trial
Measures provide that if an issuer meets both of the following criteria, the overseas securities offering and listing conducted by such
issuer will be deemed as an indirect overseas offering and listing by PRC domestic companies: (i) 50% or more of any of the issuer’s
operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most
recent fiscal year is accounted for by domestic companies; and (ii) the main parts of the issuer’s business activities are conducted
in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge
of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China. Where
an issuer submits an application for initial public offering to competent overseas regulators, such issuer must file with the CSRC within
three business days after such application is submitted.
 
The Trial Measures provide
the CSRC with power to warn, fine, and issue injunctions against both PRC domestic companies, their controlling shareholders, and their
advisors in listing or offering securities (collectively, the “Subject Entities”), as well as individuals directly responsible
for these Subject Entities (the “Subject Individuals”). For failure to comply with the Trial Measures Negative List or the
Trial Measures Filing Obligations, or materially false or misleading statements in the filing and reporting required by the Trial Measures:
(1) PRC domestic companies, and their controlling shareholders if the controlling shareholders induced the PRC domestic companies’
failure to comply, severally, may face warnings, injunctions to comply, and fines between RMB1 million and RMB10 million ($138,408 and
$1,384,083); the Subject Individuals in these entities may severally, face warnings and fines between RMB0.5 million and RMB5 million
($69,204 and $692,040). (2) Advisors in listing or offering securities that failed to dutifully advise the PRC domestic companies and
their controlling shareholders in complying with the Trial Measures and caused such failures to comply can face warnings and fines between
RMB0.5 million and 5 million ($69,204 and $692,040); the Subject Individuals in these advisor entities may, severally, face warnings
and fines between RMB0.2 million and RMB2 million ($27,682 and $276,820).
 
Furthermore, on February
24, 2023, the CSRC, together with certain other PRC governmental authorities, promulgated the Provisions on Strengthening Confidentiality
and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Revised Confidentiality and Archives
Administration Provisions, which took effect on March 31, 2023. According to the Revised Confidentiality and Archives Administration Provisions,
Chinese companies that directly or indirectly conduct overseas offerings and listings, shall strictly abide by the relevant laws and regulations
on confidentiality when providing or publicly disclosing, either directly or through their overseas listed entities, documents and materials
to securities services providers such as securities companies and accounting firms or overseas regulators in the process of their overseas
offering and listing. In the event such documents or materials contain state secrets or working secrets of government agencies, the Chinese
companies shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department
at the same level with the approving authority. In the event that such documents or materials, if divulged, will jeopardize national security
or public interest, the Chinese companies shall strictly fulfill relevant procedures stipulated by applicable national regulations. The
Chinese companies shall also provide a written statement of the specific state secrets and sensitive information provided when providing
documents and materials to securities companies and securities service providers, and the securities companies and securities service
providers shall properly retain such written statements for inspection. According to the Revised Confidentiality and Archives Administration
Provisions, where overseas securities regulators or relevant competent authorities request to inspect, investigate or collect evidence
from Chinese domestic companies concerning their overseas offering and listing or their securities firms and securities service providers
that undertake securities business for such Chinese domestic companies, such inspection, investigation and evidence collection must be
conducted under the cross-border regulatory cooperation mechanism, and the CSRC or competent authorities of the Chinese government will
provide necessary assistance pursuant to bilateral and multilateral cooperation mechanism.
 


26
 

 
Human Capital
 
As of the date of this Report,
we had a total of 55 full-time employees including three executive officers, 45 employees in our Automobile Transaction and Related Services
segment and 7 employees in our Online Ride-hailing Platform Services segment.
 
The following table sets
forth the breakdown of our employees by function in our Automobile Transaction and Related Services segment:
 


Function 
Number of
Employees 

Management 
 2 

Legal & Risk Management 
 9 

Operations 
 7 

Marketing 
 4 

Drivers & Automobile Management and Services 
 7 

Technology 
 2 

Human Resources & Administration 
 7 

Finance and Accounting 
 6 

Internal Control and Audit 
 1 

Total 
 45 

 
The following table sets
forth the breakdown of our employees by function in our Online Ride-hailing Platform Services segment:
 


Function 
Number of
Employees 

Management 
 2 

Operations 
 3 

Finance and Accounting 
 2 

Total 
 7 

 
All of our employees are
based in the cities of Chengdu, Changsha and Guangzhou, where our main operations are located.
 
We believe we offer our employees
competitive compensation packages and work environment that encourages initiative and is based on merit, and as a result, we have generally
been able to develop and maintain our human capital, including attracting and retaining qualified personnel and a stable core management
team.
 
As required by PRC regulations,
we participate in various government statutory employee benefit plans, including social insurance funds, namely a pension contribution
plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan and
a housing provident fund. We are required under PRC law to make contributions to employee benefit plans at specified percentages of the
salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time.
We have not made adequate employee benefit payments, and may be required to make up the contributions for these plans as well as to pay
late fees and fines. See “Risk Factors — Risks Related to Doing Business in China — Failure
to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.”
We are subject to and comply with PRC regulations regarding labor and social security. See “Regulations – Regulations Related
to Labor and Social Security.”
 
We enter into standard labor
and confidentiality agreements with each of our employees. We believe that we maintain a good working relationship with our employees,
and we have not experienced any major labor disputes.
 


27
 

 
Seasonality
 
We have observed seasonal
trends or patterns in revenues related to our Automobile Transaction and Related Services. Because of the PRC National Holiday in October,
New Year’s Day, and the traditional Lunar New Year in January or February, there is a seasonal decrease in the demand of automobile
purchase/leasing in certain months during the six months ended March 31 (our third and fourth fiscal quarter). We also expect to experience
seasonality in our Online Ride-hailing Platform Services, which may differ from the one in our Automobile Transaction and Related Services.
For example, we expect to experience higher user traffic during the Chinese National holiday due to the strong demand in the tourism.
Other seasonal trends that may affect us or China’s online ride-hailing industry generally may develop, and current seasonal trends
may become more extreme, all of which would contribute to fluctuations in our results of operations.
 
Our results of operations
in future quarters or years may fluctuate and deviate from the expectations of our investors, and any occurrence that disrupts our business
during any particular quarters could have a disproportionately material adverse effect on our liquidity and results of operations.
 
Research and Development
 
With an aim to standardize
our transaction process and achieve higher operating efficiency, we are developing an integrated information system for our Automobile
Transaction and Related Services. The system comprises modules for procurement, qualification assessment, delivery and post-transaction
management which covers the whole transaction process. We have completed the development of certain functions such as information entry
and delivery which are being tested by us. We launched the system in March 2020 and keep upgrading the system to support our business
expansion. We are also in the progress of developing the managing system for online ride-hailing platform, and the comprehensive management
system which could link all key information between Automobile Transaction and Related Services and Online Ride-hailing Platform Services
for our internal manage purpose.
 
Intellectual Property
 
We regard our trademarks,
domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we rely on PRC trademark
and trade secret law and confidentiality, invention assignment and non-compete agreements with our employees and others to protect our
proprietary rights. We own 19 software copyrights and 53 trademarks. We have two trademark applications pending at the PRC Trademark
Office. We have also registered numerous domain names, including www.51ruixi.com, www.91xixing.com/, 91xixingcd.com, www.coreneltech.com,
www.senmiaotech.com and senmiaotechir.com. The information on our websites is not part of, or incorporated in, this Report.
 
Despite our efforts to protect
our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology. Monitoring unauthorized use
of our technology is difficult and costly, and we cannot be certain that the steps we have taken will prevent misappropriation of our
technology. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in
substantial costs and diversion of our resources.
 
In addition, third parties
may initiate litigations against us alleging infringement of their proprietary rights or respond to our litigations declaring their non-infringement
of our intellectual property rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing
technology or license the infringed or similar technology on a timely basis, our business could be harmed. Moreover, even if we are able
to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations.
 
See “Risk Factors — Risks
Related to Our Business — We may not be able to prevent others from unauthorized use of our intellectual property,
which could harm our business and competitive position.” and “— We may be subject to intellectual property infringement
claims, which may be expensive to defend and may disrupt our business and operations.”
 
Insurance
 
We consider our insurance
coverage to be adequate as we have in place all the mandatory insurance policies required by Chinese laws and regulations and in accordance
with the commercial practices in our industry. The Auto Business Entities have obtained accident insurance and commercial liability insurance,
which are mandatory, on all the automobiles they purchased for sales, leasing or financing and pass on the costs of such insurance to
their customers in the sale/leasing/financing transaction. We also maintain the mandatory insurance with respect to carrier’s liability
in connection with our Online Ride-hailing services. We provide social security insurance including pension insurance, unemployment insurance,
work-related injury insurance and medical insurance for our employees. We do no maintain any property insurance policies, business interruption
insurance or general third-party liability insurance, nor do we maintain product liability insurance or key-man insurance. We consider
our insurance coverage to be sufficient for our business operations in China.
 


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Item
1A. Risk Factors
 
An investment in our company is subject to
a high degree of risk. The risk factors described below and similar risk factors we may face are important to understanding other statements
in this Report and should be reviewed carefully. The following information should be read in conjunction with Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related
notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Report.
 
Our business, financial condition and operating
results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below,
any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially
from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially
and adversely affect our business, financial condition, operating results and stock price.
 
Because of the following factors, as well as
other factors affecting our financial condition and operating results, past financial performance should not be considered to be a reliable
indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
 
Risk Factors Summary
 
Risks Related to Our Business and Industry
 

●We face intense competition, which could lead to our inability to secure market share or cause us to lose
market share to our competitors, any of which could materially and adversely affect our business, results of operations and financial
condition.

●If we fail to cost-effectively attract and retain online ride-hailing
drivers, or to increase the profitability of our platform by existing users, our business, results of operations and financial condition
could be materially and adversely affected.

 ●Relationship between us, our affiliates and Gaode Maps and other cooperated
partners is crucial to our ability to grow our business, results of operations and financial condition.

●Our customers’ failure to fully comply with PRC online ride-hailing-related laws may expose us to
potential penalties and negatively affect our operations.

●We are exposed to credit risk in our auto financing and prior auto financing facilitation businesses.

●Our failure to lease cars that we purchased from dealers or leased from other automobile rental companies
with a satisfied utilization may have a material and adverse effect on our business, financial condition and results of operations.

●If data provided by automobile lessees and other third-party sources or collected by us are inaccurate,
customer trust in us could decline.

●We may be subject to product liability claims if people or property are harmed by vehicles purchased through
us.

●If our safety system fails to ensure user safety while using our online ride-hailing platform, our business,
results of operations and financial condition could be materially and adversely affected.

●Changes to pricing for our online ride-hailing services could materially
and adversely affect our ability to attract or retain riders and qualified drivers.

●Any significant disruption in our IT systems could materially and adversely affect our business.

●If we fail to obtain and maintain the requisite licenses and approvals required for our online ride-hailing
business, our business may be materially and adversely affected.

●We rely primarily on a third-party insurance policy to insure our auto-related risks.

●We rely on third-party payment processors to process payments made by our business partners.

●Government policies on automobile purchases and usage in the online ride-hailing industry may materially
affect our results of operations.

●Our business is subject to laws, regulations and regulatory policies that are being continuously amended
and improved, and the interpretation and implementation of newly established policies may remain uncertain, which could have an adverse
impact on our business and future prospects.

●We have identified material weaknesses in our internal control over financial reporting.

●Our common stock will be prohibited from trading in the United States under the Holding Foreign Companies
Accountable Act, or the HFCA Act, in the future if the PCAOB is unable to inspect or investigate completely our auditors. The delisting
of our common stock, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally,
the inability of the PCAOB to conduct inspections of our auditors would deprive our investors of the benefits of such inspections.

●We face risks related to natural disasters, health epidemics and other outbreaks, such as COVID-19, which
could significantly disrupt our operations.
 


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Risks Related to Doing Business in China
 

●Our current corporate structure and business operations may be affected by the Foreign Investment Law.

●Our previous contractual arrangements in relation to Sichuan Senmiao may be subject to scrutiny by the
PRC tax authorities and they may determine that we or Sichuan Senmiao owe additional taxes, which could negatively affect our financial
condition and the value of your investment.

●If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could
result in unfavorable tax consequences to us and our non-PRC stockholders.

●Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact
on potential acquisitions we may pursue in the future.

●We are required to obtain a value-added telecommunication business certificate and be subject to foreign
investment restrictions.

●Substantial uncertainties and restrictions with respect to the political and economic policies of the
PRC government and PRC laws and regulations could have a significant impact upon the business that we may be able to conduct in the PRC
and accordingly on the results of our operations and financial condition.

●Adverse regulatory developments in China may subject us to additional regulatory review, and additional
disclosure requirements and regulatory scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments
in China may impose additional compliance requirements for companies like us with significant China-based operations, all of which could
increase our compliance costs, subject us to additional disclosure requirements.

●Compliance with China’s new Data Security Law, Measures on Cybersecurity Review, Personal Information
Protection Law, regulations and guidelines relating to the multi-level protection scheme and any other future laws and regulations may
entail significant expenses and could materially affect our business.

●Recent greater oversight by the CAC over data security, particularly for companies seeking to list on
a foreign exchange, could adversely impact our business and our offering.

●We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related
businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse
effect on our business and results of operations.

●PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental
control of currency conversion may delay or prevent us from using the proceeds of from our public offerings to make loans to or make additional
capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand
our business.

●We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and
financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material
adverse effect on our ability to conduct our business.

●Fluctuations in exchange rates could have a material adverse effect on our results of operations and the
value of your investment.

●Governmental control of currency conversion may limit our ability to utilize our net revenues effectively
and affect the value of your investment.

●Failure to make adequate contributions to various employee benefit plans as required by PRC regulations
may subject us to penalties.

●The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions
of PRC companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

●PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’
ability to increase their registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners
to liability and penalties under PRC law.
 
Risks Related to Our Securities
 

●Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock.

●The market price for our common stock may be volatile.

●We have a significant number of outstanding warrants.
 
Other General Risk Factors
 

●We may need additional capital, and financing may not be available on terms acceptable to us.

●Any harm to our brands or reputation may materially and adversely affect our business.

●A severe or prolonged downturn in the Chinese or global economy could materially and adversely affect
our business and financial condition.

 
●
Our ability to protect the confidential information of our customers may be adversely affected by cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions.

●From time to time, we may evaluate and potentially consummate strategic investments or acquisitions, which
could require significant management attention, disrupt our business and adversely affect our financial results.

 


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Risks Related to Our Business and Industry
 
We face intense competition, which could
lead to our inability to secure market share or cause us to lose market share to our competitors, any of which could materially and adversely
affect our business, results of operations and financial condition.
 
The online ride-hailing market
in China, especially in our key target markets of Chengdu and Changsha, is intensely competitive and characterized by rapid changes in
technology, shifting user preferences, and frequent introductions of new services and offerings. Our success in a given geographic market
significantly depends on our ability to maintain or increase the scale of our network in that geographic market by attracting and keeping
drivers to engage their ride-hailing business through our platform or leasing automobiles provided by us. We face intense competition
in the Automobile Transaction and Financing Services, as well as the Online Ride-hailing Platform Services. We face significant competition
from existing, well-established, and low-cost alternatives, and in the future we expect to face competition from new market entrants.
Our competitors may have significantly more resources than we do, including financial, technological, marketing and others and may be
able to devote greater resources to the development and promotion of their services. As a result, they may have deeper relationships with
online ride-hailing drivers, automobile dealers, automobile leasing companies and other third-party service providers than we do. This
could allow them to develop new services, adapt more quickly to changes in technology and to undertake more extensive marketing campaigns,
which allow them to derive greater revenue and profits from their existing user bases, enlarge their user base at lower costs, or respond
more quickly to new and emerging technologies and trends. As a consequence, our services may be less attractive to consumers and cause
us to lose market share.
 
Furthermore, they may be
able to devote greater resources to the development, promotion and sale of offerings and offer lower prices than we do, which could further
adversely affect our results of operations. Moreover, intense competition in the markets we operate in may reduce our service fees and
revenue, increase our operating expenses and capital expenditures, and lead to departures of our qualified employees. We may also be harmed
by negative publicity instigated by our competitors, regardless of its validity. We may in the future continue to encounter disputes with
our competitors, including lawsuits involving claims asserted under unfair competition laws and defamation which may adversely affect
our business and reputation. Failure to compete with current and potential competitors could materially harm our business, financial condition
and our results of operations.
 Since 2023, the municipal
transportation bureaus in a series of cities in China have released operational dynamics and risk warnings for the online ride-hailing
industry, stating that the online ride-hailing market has become saturated. They remind enterprises and practitioners who intend to engage
in online ride-hailing services should have a detailed understanding of relevant regulations, conduct market research, fully consider
changes in operating income due to factors such as supply and demand, market conditions, fluctuations or continuous declines, objectively
evaluate the actual income level of industry practitioners, and make rational and prudent career choices. On May 16, 2023, Changsha Transportation
Bureau announced that the application for new online car transportation licenses was suspended from May 16, 2023 and Chengdu Transportation
Bureau also released risk warnings in its monthly online ride-hailing industry operation monitoring information. However, we expect the
fierce competition to continue, both from current competitors and new entrants in the market that may be well-established and enjoy greater
resources or other strategic advantages. If we are unable to anticipate or react to these competitive challenges, our competitive position
could weaken, or fail to improve, and we could experience growth stagnation or even a decline in revenue that could materially and adversely
affect our business, results of operations and financial condition.

 
If we fail to cost-effectively attract and
retain online ride-hailing drivers, or to increase the profitability of our platform by existing users, our business, results of operations
and financial condition could be materially and adversely affected.
 
The growth of our online
ride-hailing platform depends in part on our ability to cost-effectively attract and retain online ride-hailing drivers who satisfy our
screening criteria and procedures, and to increase their utilization of our platform. However, to attract and retain qualified drivers,
we have, among other things, offered incentives for drivers, which would adversely affecting the liquidity and financial performance.
Since December 2023, in order to improve the efficiency of the daily operation and profitability of our platform, we have engaged a third-party
to co-operate the online ride-hailing platform by outsourcing certain daily operation work to it in most of cities our platform operates
in. We also reduced the incentives paid to the drivers and had witnessed both the number of Active Drivers on our platform and the total
number of the completed orders decreased accordingly.
 


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Other factors beyond of our control, such as laws and regulations limiting
in the markets in which we operate, vehicles or insurance, and the vehicle quantity control of PRC government, may also reduce the number
of Active Drivers on our platform or their utilization of our online ride-hailing platform. However, the increasing number of online ride-hailing
drivers in the market may cause the decrease of average income of each driver, which, in return would make our platform, or the whole
industry less attractive to drivers. For example, according to the MOT of the People’s Republic of China, the total number of certificated
online ride-hailing drivers was approximately 7.0 million in April 2024 as compared 5.4 million in April 2023. Considering the number
of online ride-hailing drivers keep increasing while the consumer demand has no significant increase in current months in China, the MOT
of certain cities, such as Changsha, Sanya has suspended issuing new online booking taxi transportation certificates and transport certificates
since April 2023 accordingly.
 
In addition, changes in driver
qualification and background check requirements may increase our costs and reduce our ability to onboard additional drivers to our platform.
Our driver qualification and background check procedure varies by jurisdiction. Any changes in the legal requirements for the qualification,
screening, and background check procedure could reduce the number of drivers in those markets or extend the time required to recruit new
drivers to our platform, which would adversely impact our business and growth.
 
Our failure to continuously
attract and retain Active Drives and to increase utilization of our online ride-hailing platform in a cost-effective way would impair
the network effect of our platform, which would in turn materially and adversely affect our business, results of operations and financial
condition.
 
The relationship between us, our affiliates
and Gaode Maps, the leading aggregation platform in China, and other cooperated partners is crucial to our ability to grow our business,
results of operations and financial condition.
 
The strategic relationship
between us, our affiliates and Gaode Maps, the leading aggregation platform, and other local online ride-hailing platforms is crucial
to our business as most of customers we provide services to are online ride-hailing drivers. Those drivers earn income on our platform
from the trip orders distributed from Gaode Maps, or directly from other platforms. If our collaboration with these platforms was terminated,
we may not be able to maintain our existing customers or attract new customers who are and will be online ride-hailing drivers, which
could materially and adversely affect our business and impede our ability to continue our operations. Our annual cooperative arrangements
with Didi on Automobile Transaction and Related Services are non-exclusive basis, and Didi may have cooperative arrangements with our
competitors.
 
We also cooperate with local
automobile dealers, automobile leasing companies, financial institutions and others to attract online ride-hailing drivers to run their
business through our platform and provide automobile transaction and financing services. Our ability to acquire customers depends on our
own marketing efforts through online advertising and billboard advertising, as well as the network of different third party sales teams.
We intend to strengthen relationships with existing financing partners and develop new relationships for our automobile transaction and
financing business. If we are not able to attract or retain cooperative automobile dealers, automobile leasing companies with favorable
term as new business partners on acceptable terms, our business growth will be hindered and our results of operations and financial condition
will suffer.
 
Illegal, improper or otherwise inappropriate
activities of customers while utilizing our online ride-hailing platform or receiving our services could expose us to liabilities and
harm our reputation, business, results of operations and financial condition.
 
Illegal, improper or otherwise
inappropriate activities by customers while utilizing our online ride-hailing platform or receiving our services could expose us to liabilities
and materially and adversely affect our reputation, business, results of operations and financial condition. These activities may include
abuse, assault, theft, false imprisonment, sexual harassment, identity theft, unauthorized use of credit and debit cards or bank accounts,
and other misconduct. The relevant regulations also require the licensed online ride-hailing platforms to ensure that the drivers and
cars engaged in providing ride services meet the requirements stipulated by the regulations. We are not able to fully control or predict
the actions of our customers and third parties, either during the process of providing services or otherwise. While we have implemented
various measures to anticipate, identify and address risks associated with these activities, we may not adequately address or prevent
all illegal, improper or otherwise inappropriate activities by our users, which could damage our brand and the viability of this business.
 


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At the same time, if the
measures we have taken to guard against these illegal, improper or otherwise inappropriate activities are too restrictive and inadvertently
prevent qualified online ride-hailing drivers otherwise in good standing from using our platform and services, or if we are unable to
implement and communicate these measures fairly and transparently or are perceived to have failed to do so, the growth and retention of
our users and their utilization of our online ride-hailing platform could be negatively impacted. For example, if we cannot complete background
checks of potential online ride-hailing drivers who apply to utilize our platform on a timely basis, we may not be able to onboard potential
online ride-hailing drivers in time and, as a result, our platform may be less attractive to qualified online ride-hailing drivers.
 
Further, we may be subject
to claims of significant liability based on traffic accidents, deaths, injuries, or other incidents that are caused by ride-hailing drivers,
consumers, or third parties. Our auto liability and general liability insurance policies may not cover all potential claims to which we
are exposed, and may not be adequate to indemnify us for all liabilities. These incidents may subject us to liability and negative publicity,
which would increase our operating costs and adversely affect our business, operating results, and future prospects. Even if these claims
do not result in liability, we will incur significant costs in investigating and defending against them. And any negative publicity related
to the foregoing, whether such incident occurred on our platform or on our competitors’ platforms, could materially and adversely
affect our reputation and brand and more importantly, public perception of the online ride-hailing industry as a whole, which could negatively
affect the demand for platforms like ours, and potentially lead to increased regulatory or litigation exposure. Any of the foregoing risks
could harm our business, results of operations and financial condition.
 
Our customers’ failure to fully comply
with PRC online ride-hailing-related laws may expose us to potential penalties and negatively affect our operations.
 
The online ride-hailing industry
is highly regulated in China. According to the guidelines issued by the different local authorities in China, including our major operations,
Chengdu and Changsha, online reservation taxi operating license, automobile certificate and online reservation taxi driver’s license
are required for a driver to operate the online ride-hailing business. Approximately 25% of our served online ride-hailing drivers have
not obtained the online reservation taxi driver’s certificates as of March 31, 2024. During the year ended March 31, 2024, we have
been fined by approximately $76,000 by Traffic Management Bureaus in Chengdu, Changsha, Guangzhou and Tianjin, for the non-compliance
on taxi driver’s certificates, of which, approximately $30,000 was further compensated by drivers or cooperated third parties. We
cannot assure you that we will not be subject to further fines, penalties or more severe administrative actions or proceedings in the
future. If we or drivers or vehicles on our platform fail to obtain or maintain any required licenses, permits or approvals or make any
necessary filings in a timely matter or at all, we may be subject to a variety of penalties, including fines or potentially being forced
to suspend, terminate or significantly reduce our operations in the city or jurisdiction. Our business and results of operations will
be materially affected if our affiliated drivers are suspended from providing ride-hailing services or receive substantial fines.
 
We are in the process of
assisting the drivers to obtain the required certificates and licenses. However, there is no guarantee that all of the drivers affiliated
with us would be able to obtain all the certificates and licenses. Our ability and method to provide the automobile transaction related
services might be affected or restricted if our affiliated drivers or automobiles do not possess the requisite licenses. Further, there
is no assurance that each of the drivers who use our platform or the cars used by such drivers in providing ride-hailing services possesses
the requisite license or certificate. Our business and results of operations will be materially and adversely affected if our affiliated
drivers are suspended from providing ride-hailing services or imposed substantial fines or if we are found to be in serious violation
of the Interim Measures due to the drivers’ failure to obtain requite licenses and/or automobile certificates in connection with
providing services through our platform.
 
If we fail to effectively manage the behaviors
of order skipping, disintermediation and other misconduct and fraud by our users, our business, results of operations and financial condition
could be materially and adversely affected.
 
Online ride-hailing drivers
on our platform may skip orders and fail to pick up riders, or circumvent our platform and complete the transaction offline and in private.
Our users may also maliciously misappropriate subsidies provided on our platform. For example, if we detect users engaging in cheating
behaviors to earn incentives we have offered, we may be required to disqualify them from using such incentives. We have also implemented
various measures to prevent order skipping. For example, we monitor the order completion rate for our online ride-hailing drivers, and
those with low credit scores based on riders’ feedback or behavior scores will be less likely to receive orders on our platform.
If we detect a persistent skipping pattern, we will permanently close their user accounts on our platform.
 
In addition, we may incur
losses from various types of fraud by our users, including use of stolen or fraudulent credit card data, attempted payments by riders
with insufficient funds and fraud committed by riders in concert with online ride-hailing drivers. Bad actors use increasingly sophisticated
methods to engage in illegal activities involving personal information, such as unauthorized use of another person’s identity, account
information or payment information and unauthorized acquisition or use of credit or debit card details, bank account information and mobile
phone numbers and accounts. Under current credit card practices, we may be liable for rides facilitated on our online ride-hailing platform
with fraudulent credit card data, even if the associated financial institution approved the credit card transaction. We are in the process
of taking measures to detect and prevent fraudulent transactions by our users, such as cross-checking a driver’s travel path against
the proposed itinerary to verify the authenticity of an order.
 


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Despite our efforts, our
measures may not eliminate order skipping, disintermediation, and other user misconducts and fraud. Our failure to adequately detect and
prevent such user behaviors could materially and adversely affect our business, results of operations and financial condition.
 
Prior consent from financial institutions
which provided financing to our online ride-hailing driver customers for the purchase of automobiles has not been obtained for us to sublease
or sell the drivers’ automobiles.
 
As described in the section
titled “Business” above, as of March 31, 2024, approximately 108 online ride-hailing drivers in Changsha exited the
online ride-hailing business and rendered their purchased automobile to Hunan Ruixi for sublease or sales in order to offset monthly payment
owed to Hunan Ruixi and the financial institutions. Their Financing Agreements with the financial institutions are still valid and in
effect. Pursuant to the Financing Agreements, the right of the automobile collateral to the financial institution belongs to the financial
institution and without their consent, we may not dispose of, use, or take possession of those automobiles. To prevent the default in
payments to the financial institutions and us, the drivers authorized us orally or in writing to sublease or sell the automobiles to other
parties, and use the cash generated from the sublease or sales to cover the monthly installment payments to the financial institution
and the monthly installment service fees as well as the automobile registration related fees that we previously advanced during the remaining
original lease terms to us. As prior consent from the financial institutions have not been obtained, the financial institutions may require
us to stop sublease and return the automobiles immediately. We may also be required to pay penalties to the financial institutions. Although
we have not received any demand from any financial institution to stop the sublease practice, there is no assurance that future demand
to stop such practice may not come along; if so, we may experience economic loss and reputation damage as a result.
 
If we are unable to collect our revenue,
repossess or sub-lease the cars held by the defaulted customers in a cost-effective manner, our business and results of operations would
be materially and adversely affected.
 
Failure to collect lease/purchase payments may have a material adverse
effect on our business operations and financial positions. We monitor the daily gross income of our served online ride-hailing drivers
through our cooperated online ride-hailing platforms as well as trace the location of each car at least every day. We also monitor the
using expenditures of each car such as the traffic violation penalty and maintenance expenses once a week. If there is any negative indicators
on the collectability of our revenue, we shall repose the car if necessary. Our measures to track the cars include installing GPS trackers
on cars. We cannot assure you that we will be able to successfully locate and recover the cars. We have in the past failed to repossess
one car as the GPS trackers failed to function properly or had been disabled, and we cannot assure you that this incident will not happen
again the future. We also cannot assure you that there will not be regulatory changes that prohibit the installation of GPS trackers,
or the realized value of the repossessed cars will be sufficient to cover our customers’ payment obligations. If we cannot repossess
some of these cars or the residual values of the repossessed cars are lower than we expected and not sufficient to cover the automobile
purchaser/lessee’ payment obligation, our business, results of operations and financial condition may be materially and adversely
affected.
 
Moreover, the current regulatory
regime for debt collection in the PRC remains unclear. We aim to ensure our collection efforts carried out by our asset management department
comply with the relevant laws and regulations in the PRC. However, if our collection methods are viewed by the automobile purchasers or
regulatory authorities as harassments, threats or other illegal means, we may be subject to risks relating to our collection practice,
including lawsuits initiated by the borrowers or prohibition from using certain collection methods by the regulatory authorities. Any
perception that our collection practices are aggressive and not compliant with the relevant laws and regulations in the PRC may result
in harm to our reputation and business, decrease in the willingness of prospective customers to apply for and utilize our service, or
fines and penalties imposed by the relevant regulatory authorities, any of which may have a material adverse effect on our business, financial
condition and results of operations.
 
We are exposed to credit risk in our Auto
Businesses. Our current risk management system may not be able to accurately assess and mitigate all risks to which we are exposed, including
credit risk.
 
We are exposed to credit risk as our equity investee company, Jinkailong
is required to provide guarantees to most of their financing partners on the financing for automobile purchases facilitated by them in
prior years. As of March 31, 2024, the maximum contingent liabilities Jinkailong would be exposed to was approximately $2.9 million, respectively,
assuming all the automobile purchasers were in default. As Hunan Ruixi holds 35% of equity interest of Jinkailong and has not made any
consideration towards to the investment, Hunan Ruixi will subject to the maximum amount of RMB3.5 million (approximately $485,000) of
which is equivalent to 35% of liabilities in case Jinkailong is liquidated in accordance with PRC’s company registry compliance.
For the year ended March 31, 2024, we recognized estimated provisions loss of approximately $500 for the guarantee services as a result
of default by the automobile purchasers. Customers may default on their lease/purchase payments for a number of reasons including those
outside of their or our control. The credit risk may be exacerbated in automobile financing due to the relatively limited credit history
and other available information of many consumers in China. If we experience a widespread default by our automobile lessees/purchasers,
our cash flow and results of operations will be materially and adversely affected. As a consequence, we could face shortfalls in liquidity
without extra financing resources for the foreseeable future and lose the ability to grow our business or may even be required to scale
down or restructure our operations.
 


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We are required to obtain licenses and permits
related to financing and lending in China for our business operations, and we may not be able to obtain or maintain such licenses or permits.
 
We may be deemed to operate
financing guarantee business by the PRC regulatory authorities. Under certain arrangements in the services, Hunan Ruixi and Jinkailong
provided guarantees to their customers who applied for financing in prior years with certain of their financing partners. In August 2017,
the PRC State Council promulgated the Regulations on the Administration of Financing Guarantee Companies (the “Financing Guarantee
Rules”), which became effective on October 1, 2017. Pursuant to the Financing Guarantee Rules, “financing guarantee”
refers to the activities in which guarantors provide guarantee to the guaranteed parties as to loans, bonds or other types of debt financing,
and “financing guarantee companies” refer to companies legally established and operating financing guarantee business. According
to the Financing Guarantee Rules, the establishment of financing guarantee companies are subject to the approval by the relevant governmental
authority, and unless otherwise stipulated, no entity may operate financing guarantee business without such approval.
 
We do not believe that the
Financing Guarantee Rules apply to our prior car financing facilitation business as we provide guarantees to our financing partners in
connection with the financing of the purchase of automobiles and such guarantees are not provided independently as our principal business.
However, due to the lack of further interpretations, the exact definition and scope of “operating financing guarantee business”
under the Financing Guarantee Rules is unclear. It is uncertain whether we would be deemed to operate financing guarantee business in
violation of relevant PRC laws or regulations because of our current arrangements with certain financial institutions. If the relevant
regulatory authorities determine that we are operating financing guarantee business, we may be required to obtain approval or license
for financing guarantee business to continue our collaboration arrangement with certain financial institutions.
 
Consequently, we may be required
to obtain approval or license for financing business to continue our current collection method of payments. If we are no longer able to
maintain our current collection method of payments, or become subject to penalties, our business, financial condition, results of operations
and prospects could be materially and adversely affected.
 
Our failure to lease cars that we purchased
from dealers or leased from other automobile rental companies with a satisfied utilization may have a material and adverse effect on our
business, financial condition and results of operations.
 
In January 2019, we started to purchase automobiles from automotive
dealers for sales. As we shifted our business focus to automobile rental since March 2020, we lease automobiles mainly for operating lease
during the year ended March 31, 2024. We primarily purchase or lease automobile models that are reliable, affordable and based on the
local regulation requirement of the automobiles used for online ride-hailing, feedback from and market analysis as to perception and demand
for such models, and that will appeal to lessees in lower-tier cities. We adopt a stable pricing formula, considering the historical and
future expenditure, remaining available leasing months and market price to determine our rental price for various rental solutions. During
the year ended March 31, 2024, our average utilization of the automobiles for operating lease, including the ones leased to Jinkailong,
was approximately 79.7%, as compared with 64.9% in the year ended March 31, 2023. However, we have limited experience in the operating
lease of automobiles, and there is no assurance that we will be able to do so effectively and the utilization of automobiles held for
operating lease is satisfied to generate sufficient profit and cash. Demand for the automobiles that we purchase or lease can change significantly
between the time the automobiles are purchased and the date of sale or lease. Demand may be affected by new automobile launches, changes
in the pricing of such automobiles, market conditions for the online ride-hailing, defects, changes in consumer preference and other factors,
and dealers may not purchase them in the quantities that we expect. We may also need to adopt more aggressive pricing strategies for these
cars than originally anticipated. We also face inventory risk in connection with the automobiles purchased, including the risk of inventory
obsolescence, a decline in values, and significant inventory write-downs or write-offs. If we were to adopt more aggressive pricing strategies,
our profit margin may be negatively affected as well. We may also face increasing costs associated with the storage of these automobiles.
Any of the above may materially and adversely affect our financial condition and results of operations.
 


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If data provided by automobile lessees and
other third-party sources or collected by us are inaccurate, incomplete or fraudulent, the accuracy of our credit assessment could be
compromised, customer trust in us could decline, and our business, financial position and results of operations would be harmed.
 
China’s credit infrastructure
is still at an early stage of development. The Credit Reference Center established by the PBOC in 2002 has been the only credit reporting
system in China. This centrally managed nationwide credit database operated by the Credit Reference Center only records limited credit
information, such as tax payments, civil lawsuits, foreclosures and bankruptcies. Moreover, this credit database is only accessible to
banks and a limited number of market players authorized by the Credit Reference Center and does not support sophisticated credit scoring
and assessment. In 2015, the PBOC announced that it would open the credit reporting market to private sectors with a view to spurring
competition and innovation, but it may be a long-term process to establish a widely-applicable, reliable and sophisticated credit infrastructure
in the market we operate.
 
For the purpose of credit
assessment, we obtain credit information from prospective customers, including online ride-hailing drivers, automobile lessees, and with
their authorization, obtain credit data from external parties to assess applicants’ creditworthiness. We may not be able to source
credit data from such external parties at a reasonable cost or at all. Such credit data may have limitations in measuring prospective
automobile purchasers’ creditworthiness. If there is an adverse change in the economic condition, credit data provided by external
parties may no longer be a reliable reference to assess an applicant’s creditworthiness, which may compromise our risk management
capabilities. As a result, our assessment of an automobile purchaser’s credit profile may not reflect that particular car buyer’s
actual creditworthiness because assessment may be based on outdated, incomplete or inaccurate information.
 
To the extent that our customers
provide inaccurate or fraudulent information to us, or the data provided by third-party sources is outdated, inaccurate or incomplete,
our credit evaluation may not accurately reflect the associated credit risks of automobile purchasers. Among other things, we rely on
data from external sources, such as the personal credit report from PBOC. These checks may fail and fraud may occur as we may fail to
discover or reveal fake documents or identities used by fraudulent automobile purchasers. Additionally, once we have obtained an automobile
purchaser’s information, the automobile purchaser may subsequently (i) become delinquent in the payment of an outstanding obligation;
(ii) default on a pre-existing debt obligation; (iii) take on additional debt; or (iv) experience other adverse financial events, making
the information we previously obtained inaccurate. We also collect car collateral location data by installing GPS trackers for lease/loan
payment monitoring purposes. The location data we collected may not be accurate. As a result, our ability to repossess the car collateral
could be severely impaired. If we are unable to collect the lease/loan payments we facilitated or repossess the car collateral due to
inaccurate or fraudulent information, our results of operations and profitability would be harmed.
 
We may be subject to product liability claims
if people or property are harmed by vehicles purchased through us.
 
Vehicles purchased through
us may be defectively designed or manufactured. As a result, we may be exposed to product liability claims relating to personal injury
or property damage. Third parties subject to such injury or damage may bring claims or legal proceedings against us because we facilitate
the financing/purchase of the product. Although we would have legal recourse against the automobile manufacturers or dealers under PRC
law, attempting to enforce our rights against the automobile manufacturers or dealers may be expensive, time-consuming and ultimately
futile. We currently maintain valid third-party liability insurance and product liability insurance in relation to vehicles purchased
through us, and also ensure that appropriate insurances have covered automobiles leased from rental companies. As a result, any material
product liability claim or litigation could have a material and adverse effect on our business, financial condition and results of operations.
Even unsuccessful claims could result in the expenditure of funds and managerial efforts in defending them and could have a negative impact
on our reputation.
 
If our safety system fails to ensure user
safety while using our online ride-hailing platform, our business, results of operations and financial condition could be materially and
adversely affected.
 
According to the Emergency
Notice on Further Strengthening the Safety Management of Online Reservation of Taxis and Carpooling of Private Vehicles jointly promulgated
by the General Office of the MOT and the General Office of the PRC Ministry of Public Security on September 10, 2018, online ride-hailing
platforms shall carry out background checks on all online ride-hailing drivers according to relevant requirements of taxi driver background
check and supervision.
 
Since December 2023, we have
engaged Anhui Lianma Technology Co., Ltd. (“Anhui Lianma”), a third-party to co-operate our online ride-hailing platform by
outsourcing certain daily operation work to Anhui Lianma in most of cities our platform operates in. Anhui Lianma has set up a safety
system to check online ride-hailing drivers and their vehicles to identify those that are not qualified to utilize our platform pursuant
to applicable laws and regulations or our internal standards. We have also established a 24/7 emergency response mechanism to deal with
emergency safety issues. Gaode Maps and other online ride-hailing platforms also have various safety measures through mobile apps, such
as one-button emergency calls, to protect riders during the trips.
 


36
 

 
We cannot assure you, however,
that our own safety system and the safety measures of our cooperated platforms will always meet our expectations or the requirements under
applicable laws and regulations, and that we will always be able to filter out unqualified online ride-hailing drivers or timely respond
to and deal with emergency matters. We may also fail to effectively control the behaviors of these drivers, or cause them to fully comply
with our platform policies and standards. Any negative publicity resulting from any failures, mistakes or omissions of our safety system,
including any safety incidents or data security breaches, could materially and adversely affect our reputation and brand, and could potentially
lead to increased regulatory or litigation exposure. We also take measures to help increase safety, prevent privacy and security breaches,
and protect against fraud which may make our platform less convenient or accessible for some drivers and discourage or diminish their
use of our platform. Any reduction in the number or availability of drivers would likely lead to a reduction in platform usage by consumers,
which in turn would make our platform less attractive to drivers. Any decline in the number of drivers or consumers using our platform
would reduce the value of our network and would harm our future results of operations. If our safety system fails to ensure user safety
while using our platform, our business, results of operations and financial condition could be materially and adversely affected.
 
We may be considered as conducting payment
services as a non-financial institution without a Payment Business Permit.
 
Gaode Maps settles
payments to XXTX’s accounts in Alipay once a week. Other Partner Platforms settles payments to accounts of Auto Business
Entities in Alipay or banks once a week. In general, after deducting service fees of these platforms, the remaining amounts,
including the earnings of the drivers and our service fees, are transferred to those accounts in Alipay or other banks. Then we
settle the payments with the online ride-hailing drivers we served.
 
According to the Measures
for the Administration of Payment Services of Non-Financial Institutions which were promulgated by the PRC government on June 14, 2010,
effective on September 1, 2010 and amended on April 29, 2020, non-financial institutions are required to obtain a payment business permit
(the “Payment Business Permit”) to provide payment services. Neither non-financial institutions nor individuals is permitted
to engage in any form of payment business without the approval of the Chines government, including payment through the Internet.
 
The relevant PRC rules and
regulations lack clear guidance as to what practice or process constitutes payment or settlement services without a Payment Business Permit.
Therefore, there is a risk that our settlement practice may cause us to be deemed as engaging in payment and settlement services without
a license. As of the date of this Report, to our knowledge, we were not required by the relevant regulatory authorities to obtain the
Payment Business Permit for our past settlement practice, nor have we received any penalty in connection with any purported operations
of payment and settlement services without a Payment Business Permit or otherwise in violation of the above-described rules and regulations.
If we encounter issues in this regard, we will consider engaging a licensed commercial bank to escrow our bank account and manage the
prepayments received from our enterprise users and refund balances attributable to our individual users. However, we cannot assure you
that our cooperation with a commercial bank in this regard would completely address the payment-related risk or such cooperation would
suffice for all of our present or future businesses. In addition, the settlement services provided by licensed third-parties and financial
institutions are subject to various rules and regulations, which may be amended or reinterpreted to encompass additional requirements.
In response to that, we may have to adjust our cooperation with such licensed commercial bank or any other financial institutions and
may thus incur higher transaction and compliance costs. Any of the circumstances would have a material and adverse effect on our business,
results of operations and financial condition.
 
Changes to pricing for our online ride-hailing
services could materially and adversely affect our ability to attract or retain riders and qualified drivers.
 
Demand for our online ride-hailing
services is sensitive to ride fares, which takes into consideration, among other things, incentives paid to online ride-hailing drivers
and our service fees. Our pricing strategies could be affected by a number of factors, including operating costs, legal and regulatory
requirements or constraints, our current and future competitors’ pricing and marketing strategies, the principal requirement of
pricing model of our cooperated platforms, and the perception of ride fares as a non-compensatory sharing of travel cost by online ride-hailing
drivers. Some competitors offer, or may in the future offer, lower-priced services. Similarly, some competitors may use marketing strategies
to attract or retain riders and qualified online ride-hailing drivers at lower costs than us. Certain competitors may also attract and
retain riders and qualified online ride-hailing drivers with significant subsidies. As such, we may be forced by competition, regulation
or other reasons to reduce ride fares and service fees, increase incentives we pay to online ride-hailing drivers on our platform, reduce
our service fees, or to increase our marketing and other expenses. Furthermore, our users’ price sensitivity may vary by geographic
locations, and as we expand, our pricing methodologies may not enable us to compete effectively in these locations. We may launch new
pricing strategies and initiatives, or modify existing pricing methodologies, any of which may not ultimately be successful in attracting
and retaining riders and qualified online ride-hailing drivers.
 


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Any significant disruption in our IT systems,
including service on our online ride-hailing platform, malfunctions of our technology systems, errors and quality issues in our software,
hardware and systems, or human errors in operating these systems, could materially and adversely affect our business, results of operation
and financial condition.
 
Our businesses are dependent
on the ability of our information technology systems to process massive amounts of information and transactions in a consistently stable
and timely manner. Our information technology infrastructure for our online ride-hailing business in Hangzhou is hosted by third-party
service providers. Our IT systems infrastructure is currently deployed, and our data is currently maintained through a customized cloud
computing system. Our servers are housed at third-party data centers, and our operations depend on the service providers’ ability
to protect our systems in their facilities as well as their own systems against damage or interruption from natural disasters, power or
telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm our systems, criminal
acts and similar events, many of which may be beyond our control. Many of our mobile applications are also provided through third-party
app stores and any disruptions to the services of these app stores may negatively affect the delivery of our mobile applications to users.
If our arrangement with the current host is terminated, or there is a lapse of service or damage to the host’s facilities, we could
experience interruptions in our service as well as delays and incur additional expenses in arranging new facilities. In the event of a
system outage, malfunction or data loss, our ability to provide services would be materially and adversely affected. In addition, a prolonged
failure of our information technology system could damage our reputation and materially and adversely affect our prospects and profitability.
 
We may continue to experience,
system failures and other events or conditions from time to time that interrupt the availability or reduce or affect the speed or functionality
of our offerings. These events could result in material losses of revenue. A prolonged interruption in the availability or reduction in
the availability, speed or other functionality of our services could adversely affect our business and reputation and could result in
the loss of users. Also, our software, hardware and systems may contain undetected errors, which could have a material adverse impact
on our online ride-hailing business, particularly where such errors are not timely detected and remedied. In addition, our platform and
services use complex software, and may have coding defects or errors that may impair our users’ ability to use our platform and
services. The models and algorithms that we use for our platform and services may also contain design or performance defects that are
not detectable even after extensive internal testing. We cannot assure you that we would be able to detect and resolve all such defects
and issues through our quality control measures. The satisfactory performance, reliability and availability of our technology and our
underlying network infrastructure are critical to our operations, user service, reputation and our ability to attract new and retain existing
car buyers and financial institutions.
 
Any errors, defects and disruptions
in services, or other performance problems with our online ride-hailing platform and other services, whether as a result of third-party
error, our error, natural disasters or security breaches, whether accidental or willful, could hurt our reputation, affect user experience
or cause economic loss or other types of damage to our users. Software and system errors or human errors could delay or inhibit order
dispatching, matching of users, route calculation, settlement of payments, and reporting of errors, or prevent us from collecting service
fees or providing services. We may not have sufficient capacity to recover all data and services lost in the event of an outage. These
factors could prevent us from processing information and other business operations, damage our brands and reputation, divert our employees’
attention, reduce our revenue, subject us to liability and cause car buyers and financial institutions to abandon our solutions and services,
any of which could adversely affect our business, financial condition and results of operations. In addition, if we fail to adopt new
technologies or adapt our mobile apps, websites and systems to changing user preferences or emerging industry standards, our business
and prospects may be materially and adversely affected.
 
If we fail to obtain and maintain the requisite
licenses and approvals required for our online ride-hailing business, or if we are required to take compliance actions that are time-consuming
or costly, our business, results of operations and financial condition may be materially and adversely affected.
 
As of the date of this Report,
we believe we have obtained all licenses and permits and made all necessary filings that are essential to the operation of our online
ride-hailing platform, many of which are generally subject to regular PRC government review or renewal. However, we cannot assure you
that we can successfully update or renew the licenses required for our business in a timely manner or that these licenses are sufficient
to conduct all of our present or future business. If the relevant authorities determine that our platform has not obtained the requisite
licenses or our operations are not in compliance with the relevant regulations, we may be required to suspend our operations, which may
cause significant loss of our users and materially and adversely affect our business, results of operations and financial condition. If
we fail to complete, obtain or maintain any of the required licenses or approvals or make the necessary filings, we may be subject to
various activities, including the imposition of fines and the discontinuation or restriction of our operations. Any such penalties may
disrupt our business operations and materially and adversely affect our business, results of operations and financial condition.
 


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We rely primarily on a third-party insurance
policy to insure our auto-related risks relating to our online ride-hailing platform services. If our insurance coverage is insufficient
for the needs of our business or our insurance providers are unable to meet their obligations, we may not be able to mitigate the risks
facing our business, which could adversely affect our business, results of operations and financial condition.
 
We may become subject to
claims arising primarily from our online ride-hailing platform services and automobile operating leasing for automobile-related incidents,
including bodily injury, property damage and uninsured and underinsured liability. If we are held liable to these automobile-related claims
under court orders and the amounts exceed our applicable aggregate coverage limits, we would bear the excess, in addition to amounts already
incurred in connection with deductibles or otherwise paid by our insurance provider. Insurance providers may continue to raise premiums
and deductibles in the future. As a result, our insurance and claims expenses could increase, or we may decide to raise our deductibles
when our policies are renewed or replaced. Our business, results of operations and financial condition could be adversely affected if
cost per claim, premiums or the number of claims significantly exceeds our historical experience and coverage limits, we experience a
claim in excess of our coverage limits, our insurance providers fail to pay on our insurance claims, we experience a claim for which coverage
is not provided, or the number of claims under our deductibles differs from historic averages.
 
Our business would be adversely affected
if drivers were classified as employees, workers or quasi-employees.
 
The classification of drivers
is currently being challenged in courts, by legislators and by government agencies in a number of jurisdictions. We may become involved
in legal proceedings, including lawsuits, demands for arbitration, charges and claims before administrative agencies, and investigations
or audits by labor, social security, and tax authorities that claim that drivers should be treated as our employees (or as workers or
quasi-employees where those statuses exist), rather than as independent contractors. We generally treat drivers as independent contractors.
However, we may not be successful in defending the classification of drivers in some or all jurisdictions where it is challenged. Furthermore,
the costs associated with defending, settling, or resolving pending and future lawsuits (including demands for arbitration) relating to
the classification of drivers have been and may continue to be material to our business. In addition, even if we prevail under current
law, the process can be time-consuming and cost-inefficient. The law may also be changed in the future in ways that are unfavorable to
us. Reclassification of drivers as employees, workers or quasi-employees where those statuses exist could require us to fundamentally
change our business model, with repercussions that are difficult to anticipate. Among other things, reclassification could subject us
to vicarious liability for any misconduct of drivers, require us to pay them wages, make social insurance contributions or provide other
benefits, or reduce our attractiveness to drivers given the loss of flexibility under an employee model.
 
In December 2021, media reported
that China plans to amend laws to allow ride-hailing drivers and food delivery workers to form unions. Unions of ride-hailing drivers
and food delivery worker in China may complicate our relationship with them and our supply of drivers may be affected adversely.
 
Reclassification could also
impact our current financial statement presentation, including the calculation of our revenues, cost of revenues and expenses, as further
described in our significant and critical accounting policies in Note 3 to our consolidated financial statements.
 
We rely on third-party payment processors
to process payments made by our business partners and payments made to private car owners and taxi drivers on our platform, and if we
cannot manage our relationships with such third parties and other payment-related risks, our business, results of operations and financial
condition could be adversely affected.
 
We rely on third-party payment
processors, such as Alipay and commercial banks, to process payments made by our business partners and payments made to online ride-hailing
drivers on our platform. If any of our third-party payment processors terminates its relationship with us or refuses to renew its agreement
with us on commercially reasonable terms, we would need to find an alternative payment processor, and may not be able to secure similar
terms or replace such payment processor in an agreeable timeframe. Further, the software and services provided by our third-party payment
processors may fail to meet our expectations, contain errors or vulnerabilities, encounter disruption or compromise, or experience outages.
Our third-party payment processors may also be penalized or suspended if they fail to protect personal information in compliance with
relevant laws and regulations. Any of these risks could cause us to lose our ability to accept online payments or other payment transactions
or make timely payments to private car owners and taxi drivers on our platform, any of which could make our platform less convenient and
attractive to users and adversely affect our ability to attract and retain users.
 


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We may in the future offer
new payment options to users that may be subject to additional regulations and risks. We are also subject to a number of other laws and
regulations relating to the payments we accept from our business partners, including with respect to money laundering, money transfers,
privacy and information security. If we fail to comply with applicable rules and regulations, we may be subject to civil or criminal penalties,
fines or higher transaction fees and may lose our ability to accept online payments or other payment card transactions, which could make
our services less convenient and attractive to our users. If any of these events occurs, our business, results of operations and financial
condition could be adversely affected.
 
We depend on the ability of our online ride-hailing
platform to operate across third-party applications and platforms that we do not control.
 
In connection with our online
ride-hailing business, we have integrations with Gaode Maps, Alipay, Partner Platforms and other third-party service providers. As our
online ride-hailing services expand and evolve, we may have an increasing number of integrations with third-party applications, products
and services. Third party applications, products and services are constantly evolving, and we may not be able to maintain or modify our
platform to ensure its compatibility with third-party offerings following such changes. In addition, some of our competitors or technology
partners may take actions which disrupt the interoperability of our platform with their own products or services, or exert strong business
influence on our ability to and the terms on which we operate and distribute our platform. As our online ride-hailing services continue
to evolve, we expect the types and levels of competition to increase. Should any of our competitors or technology partners modify their
products, standards or terms of use in a manner that degrades the functionality or performance of our platform or gives preferential treatment
to competitive products or services or is otherwise disadvantageous to us, our business, results of operations and financial condition
could be materially and adversely affected.
 
Government policies on automobile purchases
and usage in the online ride-hailing industry may materially affect our results of operations.
 
Government policies on automobile
purchases and ownership may have a material effect on our business due to their influence on consumer behaviors. Since 2009, the PRC government
has changed the purchase tax on automobiles with 1.6 liter or smaller engines several times. In addition, in August 2014, several PRC
governmental authorities jointly announced that from September 2014 to December 2017, purchases of NEVs designated on certain catalogs
will be exempted from the purchase taxes. In April 2015, several PRC governmental authorities also jointly announced that from 2016 to
2020, NEV purchasers designated on certain catalogs will enjoy subsidies. In December 2016, relevant PRC governmental authorities further
adjusted the subsidy policy for NEVs. On March 26, 2019, the PRC governmental authorities updated government subsidy policy for NEVs which
raises the threshold for the subsidy and reduces the amount of subsidies. On April 23, 2020, relevant PRC governmental authorities issue
a notice, amongst others, that the subsidy policy for NEVs will be extended to the end of 2022, while the amount of subsidies will be
reduced year by year. According to a notice effective from January 1, 2021, the subsidies will be declined by 20% on 2020’s basis.
On March 24, 2021, Chengdu Ecological Environment Bureau issued the Action Plan for Prevention and Control of Air Pollution in Chengdu
in 2021, pursuant to which, all the new cars (including the replaced ones) used for online ride-hailing should be NEVs or hydrogen fuel
cell vehicles. Pursuant to the Action Plan for Prevention and Control of Air Pollution in Chengdu in 2022 issued on March 23, 2022, the
whole city shall strive to ensure bus and cars used for online ride-hailing be NEVs. On August 21, 2018, General Office of Changsha Municipal
People’s Government issued the Provisional Detailed Rules of the Implementation Rules for the Administration of Online Booking Taxi
Management Services for Changsha, pursuant to which, the company who operates online ride-hailing platform shall give priority to the
use of NEVs, and the number of NEVs put into operation shall not be less than 30%. On April 7, 2021, General Office of Changsha Municipal
People’s Government issued the Three-year Action Plan of Blue Sky Defense for Changsha, pursuant to which, at least 50% of the new
cars used for online ride-hailing should be NEVs or hydrogen fuel cell vehicles at the end of calendar year 2023.
 
We have been developing strategic
collaboration with BYD, a leading NEV manufacturer in China, and other automobile rental companies who are able to lease us qualified
NEVs. As we witness the emergence of NEVs in the automotive industry, as well as the online ride-hailing industry, as the next-generation
trend, we have consistently focused on strengthening our cooperation with leading NEV manufacturers to obtain sufficient NEVs with favorable
terms for our businesses. However, we cannot ensure we are able to retain long-term stable cooperative relationships with these NEVs companies.
Our business growth will be hindered and our results of operations and financial condition will suffer if we could not obtain considerable
resources for our business expansions.
 
Besides, we cannot predict
whether government subsidies will remain in the future or whether similar incentives will be introduced, and if they are, their impact
on automobile retail transactions in China. It is possible that automobile retail transactions may decline significantly upon expiration
of the existing government subsidies if consumers have become used to such incentives and delay purchase decisions in the absence of new
incentives. If automobile retail transactions indeed decline, our revenues may fluctuate and our results of operations may be materially
and adversely affected.
 


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Our business is subject to laws, regulations
and regulatory policies that are being continuously amended and improved, and the interpretation and implementation of newly established
policies may remain uncertain, which could have an adverse impact on our business and future prospects.
 
As of March 31, 2024, our
business is available in 22 cities in China. As the online ride-hailing industry is still at a relatively early stage of development,
new laws and regulations may be adopted from time to time to address new issues that come to the authorities’ attention. In addition,
considerable uncertainties still exist with respect to the interpretation and implementation of existing laws and regulations governing
our business activities. For example, we generally treat drivers as independent contractors, but that determination may be challenged.
See “Risks—Our business would be adversely affected if drivers were classified as employees, workers or quasi-employees”.
A large number of proposals are before various regional, and local legislative bodies and regulatory entities regarding issues related
to our industry or our business model. As of March 31, 2024, we had not been subject to any material fines or other penalties under any
PRC laws or regulations as to our business operations. As we expand into new cities or as we add new products and services to our platform,
we may become subject to additional laws and regulations that we are not subject to now. However, if the PRC government tightens regulatory
for industries our business been involved in the future, and subject industry participants to new or specific requirements (including
without limitation, capital requirements and licensing requirements), our business, financial condition and prospects would be materially
and adversely affected. Meanwhile, compliance with existing and future rules, laws and regulations can be costly and if our practice is
deemed to violate any existing or future rules, laws and regulations, it may face injunctions, including orders to cease non-compliant
activities, and may be exposed to other penalties as determined by the relevant government authorities as well.
 
Our business is subject to risks related
to China’s automobile leasing and financing industry, including industry-wide and macroeconomic risks.
 
We operate in China’s
automobile leasing and financing industry. We cannot assure you that this market will continue to grow rapidly in the future. Further,
the growth of China’s automobile leasing and financing industry could be affected by many factors, including:
 

●general economic conditions in China and around the world;

●the impact by public health epidemics, including epidemic prevention policies in China on the industries we operate in and our business,
results of operations and financial condition

●the growth of disposable household income and the availability and cost of credit available to finance car purchases and lease;

●the growth of China’s automobile industry;

●taxes and other incentives or disincentives related to NEV purchases and ownership;

●environmental concerns and measures taken to address these concerns;

●the cost of energy, including gasoline prices, and the cost of car license plates in various cities with license plate lottery or
auction systems in China;

●the improvement of the highway system and availability of parking facilities;

●other government policies relating to automobile leasing and financing in China;

●fluctuations in the sales and price of new and used cars;

●consumer acceptance of financing car purchases;

●changes in demographics and preferences of car purchasers;

●ride sharing, transportation networks, and other fundamental changes in transportation pattern; and

●other industry-wide issues, including supply and demand for cars and supply chain challenges.
 
Any adverse change to these
factors could reduce demand for used cars and hence demand for our services, and our results of operations and financial condition could
be materially and adversely affected.
 


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We have incurred net losses and may continue
to incur net losses in the future.
 
We had net losses of $4,234,214
and $3,790,693 in the years ended March 31, 2024 and 2023, respectively. We may continue to incur losses in the future. We anticipate
that our operating expenses will increase in the foreseeable future as we schedule to attract more customers and further enhance and develop
our current businesses and may seek for other profitable business in the future. These efforts may prove more expensive than we currently
anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. Our net revenue growth may
slow, our net income margins may decline or we may incur additional net losses in the future and may not be able to achieve and maintain
profitability on a quarterly or annual basis. In addition, our net revenue growth rate will likely decline as our net revenue grows to
higher levels.
 
Our operations depend on the performance
of the internet infrastructure and fixed telecommunications networks in China.
 
Almost all access to the
internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision
of the MIIT. We primarily rely on a limited number of telecommunication service providers to provide us with data communications capacity
through local telecommunications lines and internet data centers to host our servers. We have limited access to alternative networks or
services in the event of disruptions, failures or other problems with China’s internet infrastructure or the fixed telecommunications
networks provided by telecommunication service providers. With the expansion of our business, we may be required to upgrade our technology
and infrastructure to keep up with the requirements of our operations. We cannot assure you that the internet infrastructure and the fixed
telecommunications networks in China will be able to support the demands associated with the continued growth in internet usage.
 
In addition, we have no control
over the costs of the services provided by telecommunication service providers. If the prices we pay for telecommunications and internet
services rise significantly, our results of operations may be adversely affected. Furthermore, if internet access fees or other charges
to internet users increase, our user traffic may decline and our business may be harmed.
 
We have identified material weaknesses in
our internal control over financial reporting. If we fail to develop and maintain an effective system of internal control over financial
reporting, we may be unable to accurately report our financial results or prevent fraud.
 
In connection with the audit
of our consolidated financial statements for the year ended March 31, 2024, we have identified “material weaknesses” and other
control deficiencies including significant deficiencies in our internal control over financial reporting. As defined in the standards
established by the Public Company Accounting Oversight Board of the United States (the “PCAOB”), a “material weakness”
is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
 
The material weaknesses that
have been identified include: (i) insufficient personnel with appropriate levels of accounting knowledge and experience to address complex
U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP; (ii) be lacking adequate
policies and procedures in internal audit function to ensure that our policies and procedures have been carried out as planned; and (iii)
had deficiencies in our IT general control regarding to the Logical Access Security, Change Management, IT Operations and Cybersecurity
of our financial system and key application system.
 
We have implemented, and
will continue to implement, measures designed to improve our internal control over financial reporting and remediate the control deficiencies
that led to these material weaknesses. We plan to (i) continuously hire additional accounting staffs with comprehensive knowledge of U.S.
GAAP and SEC reporting requirements; (ii) ameliorate our internal audit to assist with assessment of Sarbanes-Oxley compliance requirements
and improvement of internal controls related to financial reporting; and (iii) improving our IT environment and daily management.
 


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We cannot assure you that
the measures we have taken to date, and actions we intend to take in the future, will be sufficient to remediate material weaknesses in
our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. In addition, neither
our management nor an independent registered public accounting firm has performed an evaluation of our internal control over financial
reporting in accordance with the provisions of the Sarbanes-Oxley Act because no such evaluation has been required. Had we or our independent
registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions
of the Sarbanes-Oxley Act, additional material weaknesses may have been identified. If we are unable to successfully remediate our existing
or any future material weaknesses in our internal control over financial reporting, or identify any additional material weaknesses, the
accuracy and timing of our financial reporting may be adversely affected, potentially resulting in restatements of our financial statements,
we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports and applicable Nasdaq
listing requirements, investors may lose confidence in our financial reporting, and our share price may decline as a result.
 
We have limited business insurance coverage.
 
Insurance companies in China
currently do not offer as extensive an array of insurance products as insurance companies in more developed economies. Currently, we do
not have any business liability or disruption insurance to cover our operations other than the accident insurance and commercial liability
insurance, which are mandatory, on all the automobiles we purchase for sales or financing. We have determined that the costs of insuring
for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for
us to have such insurance. Any uninsured business disruptions may result in our incurring substantial costs and the diversion of resources,
which could have an adverse effect on our results of operations and financial condition.
 
Our common stock will be prohibited from
trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCA Act, in the future if the PCAOB is unable
to inspect or investigate completely our auditors. The delisting of our common stock, or the threat of their being delisted, may materially
and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections of our auditors would
deprive our investors of the benefits of such inspections.
 
The Holding Foreign Companies
Accountable Act, or the HFCAA, was enacted on December 18, 2020. The HFCAA states if the SEC determines that we have filed audit reports
issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning
in 2021, the SEC shall prohibit our shares from being traded on a national securities exchange or in the over-the-counter trading
market in the United States.
 
Our current auditor, Marcum
Asia CPAs LLP, or Marcum Asia, the independent registered public accounting firm that issues the audit report included elsewhere in this
annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject
to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional
standards. Marcum Asia is headquartered in New York, New York, and was not included in the list of PCAOB Identified Firms in the PCAOB
Determination Report issued in December 2021. We are required by the HFCAA to have an auditor that is subject to the inspection by the
PCAOB. While our present auditor is located in the United States and the PCAOB is able to conduct inspections on such auditor, to the
extent this status changes in the future and our auditor’s audit documentation related to their audit reports for our company becomes
outside of the inspection by the PCAOB or if the PCAOB is unable to inspect or investigate completely our auditor because of a position
taken by an authority in a foreign jurisdiction, trading in our common stock could be prohibited under the HFCAA, and as a result our
common stock could be delisted from Nasdaq.
 
On March 24, 2021, the SEC
adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA, which became
effective on May 5, 2021. We will be required to comply with these rules if the SEC identifies our auditors as having a “non-inspection” year
under a process to be subsequently established by the SEC.
 
On May 13, 2021, the PCAOB
proposed a new rule for implementing the HFCAA. Among other things, the proposed rule provides a framework for the PCAOB to use when determining,
under the HFCAA, whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction
because of a position taken by one or more authorities in that jurisdiction. The proposed rule would also establish the manner of the
PCAOB’s determinations; the factors the PCAOB will evaluate and the documents and information it will consider when assessing whether
a determination is warranted; the form, public availability, effective date, and duration of such determinations; and the process by which
the board of the PCAOB can modify or vacate its determinations. The proposed rule was adopted by the PCAOB on September 22, 2021 and approved
by the SEC on November 5, 2021.
 


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On June 22, 2021, the U.S.
Senate passed the Accelerating Holding Foreign Companies Accountable Act which proposed to reduce the number of consecutive non-inspection
years required for triggering the prohibitions under the HFCAA from three years to two, thus reducing the time period before the securities
of such foreign companies may be prohibited from trading or delisted. On December 29, 2022, the Accelerating Holding Foreign Companies
Accountable Act was signed into law by the U.S. House of Representatives, which officially reduce the number of years that the auditor
is not subject to inspection to two consecutive years. On December 16, 2021, the PCAOB issued a report on its determinations that it is
unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong
because of positions taken by mainland China and Hong Kong authorities in those jurisdictions. The PCAOB has made such designations as
mandated under the HFCA Act. Pursuant to each annual determination by the PCAOB, the SEC will, on an annual basis, identify issuers that
have used non-inspected audit firms and thus are at risk of such suspensions in the future. As of the date of this annual report, our
auditor is not subject to the determinations announced by the PCAOB on December 16, 2021.
 
The SEC is assessing how
to implement other requirements of the HFCAA, including the listing and trading prohibition requirements described above. The SEC may
propose additional rules or guidance that could impact us if our auditor is not subject to the PCAOB inspection. For example, on August
6, 2020, the President’s Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors
from Significant Risks from Chinese Companies to the then President of the United States. This report recommended the SEC implement five
recommendations to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfill its statutory
mandate. Some of the concepts of these recommendations were implemented with the enactment of the HFCAA. However, some of the recommendations
were more stringent than the HFCAA. For example, if a company was not subject to the PCAOB inspection, the report recommended that the
transition period before a company would be delisted would end on January 1, 2022.
 
On August 26, 2022, the PCAOB
signed a Statement of Protocol with the CSRC and the Ministry of Finance of the PRC (the “Statement of Protocol”), which is
intended to enable the PCAOB to inspect and investigate completely registered public accounting firms in mainland China and Hong Kong.
According to a statement released by the PCAOB, the Statement of Protocol (i) provides the PCAOB with sole discretion to select the firms,
audit engagements and potential violations it inspects and investigates without consultation with, nor input from, Chinese authorities,
(ii) puts procedures in place for PCAOB inspectors and investigators to view complete audit work papers with all information included
and for the PCAOB to retain information as needed and (iii) provides the PCAOB with direct access to interview and take testimony from
all personnel associated with the audits the PCAOB inspects or investigates. While the Chairs of both the PCAOB and the SEC made statements
supporting the Statement of Protocol, both emphasized that this is only the first step in the process. As such, uncertainties remain regarding
how the Statement of Protocol will be implemented and how it will impact China-based issuers and there is no assurance that the PCAOB
will be able to execute, in a timely manner, its future inspections and investigations in a manner that satisfies the Statement of Protocol.
While the Statement of Protocol may lead to resolution of the previously identified issues, there can be no assurance that this will be
the case.
 
On December 15, 2022, the
PCAOB issued a new Determination Report which: (1) vacated the December 16, 2021 Determination Report; and (2) concluded that the PCAOB
has been able to conduct inspections and investigations completely in the PRC in 2022. The December 15, 2022 Determination Report cautions,
however, that authorities in the PRC might take positions at any time that would prevent the PCAOB from continuing to inspect or investigate
completely. As required by the HFCAA, if in the future the PCAOB determines it no longer can inspect or investigate completely because
of a position taken by an authority in the PRC, the PCAOB will act expeditiously to consider whether it should issue a new determination.
 
While the HFCAA is not currently
applicable to the Company because the Company’s current auditors are subject to PCAOB review, if this changes in the future for
any reason, the Company may be subject to the HFCAA. The implications of this regulation if the Company were to become subject to it are
uncertain. Such uncertainty could cause the market price of our common stock to be materially and adversely affected, and our securities
could be delisted or prohibited from being traded on Nasdaq earlier than would be required by the HFCAA. If our common stock
is unable to be listed on another securities exchange by then, such a delisting would substantially impair your ability to sell or purchase
the common stock when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact
on the price of the common stock.
 
We face risks related to natural disasters,
health epidemics and other outbreaks, such as COVID-19, which could significantly disrupt our operations.
 
We are vulnerable to other
natural disasters and calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots,
terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures or
internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect
our ability to provide products and services.
 
The COVID-19 pandemic has
materially and adversely affected the global economy, our markets in China and our business. Our business was adversely affected by the
effects of COVID-19 coronavirus, the prevention and control policies, including the zero-COVID policy in China. Although China has adjusted
the prevention and control policies against COVID-19 and the market has been gradually recovering from the COVID-19 pandemic, we could
not forecast whether the prevention and control policies shall be similar if other epidemics incur in the future. Upon such occurrence,
our operation may be materially and adversely impacted. Our business could also be adversely affected by the effects of other epidemics.
Our business operations could be disrupted if any of our employees is infected, since it could require our employees to be quarantined
and/or our offices to be disinfected. In addition, our results of operations could be adversely affected to the extent that any of these
epidemics harms the Chinese economy in general.
 

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Risks Related to Doing Business in China
 
1.
Corporate Structure
 
Our current corporate structure and business
operations may be affected by the Foreign Investment Law. If the PRC government deems that our business falls within certain relevant
industries that are subject to restriction or limitation, or if these regulations or the interpretation of existing regulations change
in the future, we may have to adjust our corporate structure, switch our business focus, or even be forced to relinquish our interests
in those operations.
 
The PRC Foreign Investment
Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that operate in industries specified
as either “restricted” or “prohibited” from foreign investment in a “Negative List”. Foreign ownership
of internet-based businesses, such as distribution of online information, is subject to restrictions under current PRC laws and regulations.
For example, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service
provider (except e-commerce, domestic multiparty communication, store-and-forward and call center) in accordance with the Provisions on
the Administration of Foreign-invested Telecommunication Enterprises and the Special Administrative Measures for Entrance of Foreign Investment
(Negative List) (2021 Version) (which came into force and replaced the 2020 Version on January 1, 2022). The PRC Foreign Investment Law
provides that foreign-invested entities operating in “restricted” or “prohibited” industries will require market
entry clearance and other approvals from relevant PRC government authorities. If any of our business is “restricted” or “prohibited”
from foreign investment under the “Negative List” effective at the time, we may be deemed to be in violation of the Foreign
Investment Law, and we may be required to unwind or restructure our business operations, any of which may have a material adverse effect
on our business operation.
 
Furthermore, if future laws,
administrative regulations or provisions mandate further actions to be taken by companies with respect to our business operation, we may
face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate
measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate
structure and business operations.
 
Our Previous Contractual arrangements in
relation to Sichuan Senmiao may be subject to scrutiny by the PRC tax authorities and they may determine that we or Sichuan Senmiao owe
additional taxes, which could negatively affect our financial condition and the value of your investment.
 
Under applicable PRC laws
and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within
ten years after the taxable year when the transactions are conducted. The EIT Law requires every enterprise in China to submit its annual
enterprise income tax return together with a report on transactions with its related parties to the relevant tax authorities. The tax
authorities may impose reasonable adjustments on taxation if they have identified any related party transactions that are inconsistent
with arm’s length principles. We may face material and adverse tax consequences if the PRC tax authorities determine that our previous
contractual arrangements among Senmiao Consulting, Sichuan Senmiao, and Sichuan Senmiao Shareholders were not entered into on an arm’s
length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust
Sichuan Senmiao’s income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things,
result in a reduction of expense deductions recorded by Sichuan Senmiao for PRC tax purposes, which could in turn increase its tax liabilities
without reducing Senmiao Consulting’s tax expenses. In addition, if the equity interest transfer between Senmiao Consulting and
certain shareholders of Sichuan Senmiao Shareholders in March 2022 was viewed as a gift and subject Senmiao Consulting to PRC income tax,
the PRC tax authorities may impose late payment fees and other penalties on Sichuan Senmiao for the adjusted but unpaid taxes according
to the applicable regulations. Our financial position could be materially and adversely affected if Sichuan Senmiao’s tax liabilities
increase or if it is required to pay late payment fees and other penalties.
 


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If we are classified as a PRC resident enterprise
for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC stockholders.
 
Under the EIT Law and its
implementation rules, an enterprise established outside of the PRC with a “de facto management body” within the PRC is considered
a resident enterprise and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules
define the term “de facto management body” as the body that exercises full and substantial control over and overall management
of the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation
issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto management
body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore
enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the
criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto
management body” test should be applied in determining the tax resident status of all offshore enterprises. According to Circular
82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident
by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global
income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC;
(ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations
or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder
resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside
in the PRC.
 
We believe none of our entities
outside of China is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination
by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.”
As substantially all of our management members are based in China, it remains unclear how the tax residency rule will apply to our case.
If the PRC tax authorities determine that the Company or any of our subsidiaries outside of China is a PRC resident enterprise for PRC
enterprise income tax purposes, then the Company or such subsidiary could be subject to PRC tax at a rate of 25% on its world-wide income,
which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations.
Furthermore, if the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, gains realized
on the sale or other disposition of our securities may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20%
in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to
be from PRC sources. It is unclear whether non-PRC stockholders of our company would be able to claim the benefits of any tax treaties
between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce
the returns on your investment in our securities.
 
Enhanced scrutiny over acquisition transactions
by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.
 
The PRC tax authorities have
enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in
a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular 698, which became
effective in January 2008, and a SAT Bulletin 7 in replacement of some of the existing rules in Circular 698, which became effective in
February 2015.
 
Under Circular 698, where
a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests of a PRC “resident enterprise”
indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, may
be subject to PRC enterprise income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable
commercial purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at a rate of up to 10%. Circular
698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related
parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable
income of the transaction.
 


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In February 2015, the SAT
issued SAT Bulletin 7 to replace the rules relating to indirect transfers in Circular 698. SAT Bulletin 7 has introduced a new tax regime
that is significantly different from that under Circular 698. SAT Bulletin 7 extends its tax jurisdiction to not only indirect transfers
set forth under Circular 698 but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign
intermediate holding company. In addition, SAT Bulletin 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial
purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities
market. SAT Bulletin 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for
the transfer) of the taxable assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring the taxable
assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being the transferor,
or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer.
Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company
if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result,
gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated
to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests
in a PRC resident enterprise.
 
On October 17, 2017, the
SAT issued the Public Notice on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or the SAT Notice
37, which came into effect on December 1, 2017. According to SAT Notice 37, where the non-resident enterprise fails to declare its tax
payable pursuant to Article 39 of the EIT Law, the tax authority may order it to pay its tax due within required time limits, and the
non-resident enterprise shall declare and pay its tax payable within such time limits specified by the tax authority. If the non-resident
enterprise voluntarily declares and pays its tax payable before the tax authority orders it to do so, it shall be deemed that such enterprise
has paid its tax payable in time.
 
We face uncertainties on
the reporting and consequences on future private equity financing transactions, share exchange or other transactions involving the transfer
of shares in our company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident enterprises
with respect to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiaries to assist in the
filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or
being taxed, under Circular 59, SAT Bulletin 7 or SAT Notice 37, and may be required to expend valuable resources to comply with Circular
59, SAT Bulletin 7 and SAT Notice 37 or to establish that we and our non-resident enterprises should not be taxed under these circulars,
which may have a material adverse effect on our financial condition and results of operations.
 
The PRC tax authorities have
the discretion under SAT Circular 59, SAT Bulletin 7 and SAT Notice 37 to make adjustments to the taxable capital gains based on the difference
between the fair value of the taxable assets transferred and the cost of investment. Although we currently have no plans to pursue any
acquisitions in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures.
If we are considered a non-resident enterprise under the EIT Law and if the PRC tax authorities make adjustments to the taxable income
of the transactions under SAT Circular 59, SAT Bulletin 7 and SAT Notice 37, our income tax costs associated with such potential acquisitions
will be increased, which may have an adverse effect on our financial condition and results of operations.
 
2.
Other Risks
 
We are required to obtain a value-added
telecommunication business certificate and be subject to foreign investment restrictions.
 
PRC regulations impose sanctions
for engaging in Internet information services of a commercial nature without having obtained an ICP certificate. PRC regulations also
impose sanctions for engaging in the operation of online data processing and transaction processing without having obtained an online
data processing and transaction processing, or ODPTP, certificate (ICP and ODPTP are both sub-sets of value-added telecommunication business
certificates). These sanctions include corrective orders and warnings from the PRC communication administration authority, fines and confiscation
of illegal gains and, in the case of significant infringements, the websites may be ordered to cease operation. To the extent that the
PRC regulatory authorities require such value-added telecommunication certificate to be obtained or set forth rules that impose additional
requirements. As of the date of this Report, none of our subsidiaries have been authorized VATS licenses as we do not operate the value-added
telecommunications services as defined by the regulations. However, it is uncertain whether any of our business are defined as the operation
of a value-added telecommunication business in the future and we do not obtain such certificate, we may be subject to the sanctions described
above.
 


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According to the Provisions
on the Administration of Foreign-Invested Telecommunication Enterprises, the ratio of investment by foreign investors in a foreign-invested
telecommunication enterprise that engages in the operation of a value-added telecommunication business shall not exceed 50%. Foreign investors
are only permitted to invest up to 50% of the registered capital in a foreign-invested telecommunication enterprise that engages in the
operation of commercial Internet information services or general online data processing and transaction processing services.
 
As an exception, Circular
196, which was promulgated on June 19, 2015, provides that foreign investors are permitted to invest up to 100% of the registered capital
in a foreign-invested telecommunication enterprise engaging in the operation of online data processing and transaction processing (E-commerce).
While Circular 196 permits foreign ownership, in whole or in part, of online data processing and transaction processing businesses (E-commerce),
a sub-set of value-added telecommunications services, there is still uncertainty regarding whether foreign investment restrictions may
be applied to our business and industry.
 
Further, under either circumstance,
the largest foreign investor will be required to have a satisfactory business track record and operational experience in the value-added
telecommunication business. Any restructuring to meet the requirements may be costly and may involve interruptions to our business. If
we are unable to obtain the telecommunication business certificate in a timely fashion, our business may be materially and adversely affected.
 
Substantial uncertainties and restrictions
with respect to the political and economic policies of the PRC government and PRC laws and regulations could have a significant impact
upon the business that we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition.
 
Our business operations conducted
through our PRC operating entities may be adversely affected by the current and future political environment in the PRC. Recently, the
PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice,
including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas,
adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. The Chinese
government exerts substantial influence and control over the manner in which we must conduct our business activities. Our ability to operate
in China may be adversely affected by changes in Chinese laws and regulations. Under the current government leadership, the government
of the PRC has been pursuing reform policies which have adversely affected China-based operating companies whose securities are listed
in the United States, with significant policies changes being made from time to time without notice. There are substantial uncertainties
regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing
our business, or the enforcement and performance of our contractual arrangements with borrowers in the event of the imposition of statutory
liens, death, bankruptcy or criminal proceedings. Only after 1979 did the Chinese government begin to promulgate a comprehensive system
of laws that regulate economic affairs in general, deal with economic matters such as foreign investment, corporate organization and governance,
commerce, taxation and trade, as well as encourage foreign investment in China. Although the influence of the law has been increasing,
China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects
of economic activities in China. Also, because these laws and regulations are relatively new, and because of the limited volume of published
cases and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties.
New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. In addition, there have
been constant changes and amendments of laws and regulations over the past 30 years in order to keep up with the rapidly changing society
and economy in China. Because government agencies and courts provide interpretations of laws and regulations and decide contractual disputes
and issues, their inexperience in adjudicating new business and new polices or regulations in certain less developed areas causes uncertainty
and may affect our business. Consequently, we cannot predict the future direction of Chinese legislative activities with respect to either
businesses with foreign investment or the effectiveness on enforcement of laws and regulations in China. The uncertainties, including
new laws and regulations and changes of existing laws, as well as judicial interpretation by inexperienced officials in the agencies and
courts in certain areas, may cause possible problems to foreign investors. Although the PRC government has been pursuing economic reform
policies for more than two decades, the PRC government continues to exercise significant control over economic growth in the PRC through
the allocation of resources, controlling payments of foreign currency, setting monetary policy and imposing policies that impact particular
industries in different ways. We cannot assure you that the PRC government will continue to pursue policies favoring a market oriented
economy or that existing policies will not be significantly altered, especially in the event of a change in leadership, social or political
disruption, or other circumstances affecting political, economic and social life in the PRC.
 


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Accordingly, given the PRC
government’s significant oversight and discretion over the conduct of our operating subsidiaries’ business, it may intervene or
influence the operations of our PRC subsidiaries at any time and to exert control over an offering of securities conducted overseas and/or
foreign investment in China-based issuers, which may cause us to make material changes to the operations of our PRC subsidiaries and could
significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our
securities to significantly decline or be worthless.
 
Adverse regulatory developments in China
may subject us to additional regulatory review, and additional disclosure requirements and regulatory scrutiny to be adopted by the SEC
in response to risks related to recent regulatory developments in China may impose additional compliance requirements for companies like
us with significant China-based operations, all of which could increase our compliance costs, subject us to additional disclosure requirements.
In addition, uncertainties with respect to the PRC legal system could adversely affect us.
 
We conduct all of our business
through our subsidiaries in China. Our operations in China are governed by PRC laws and regulations. Our PRC subsidiaries are generally
subject to laws and regulations applicable to foreign investments in China and, in particular, laws and regulations applicable to wholly
foreign-owned enterprises. The PRC legal system is based on statutes. Prior court decisions may be cited for reference but have limited
precedential value.
 
The recent regulatory developments
in China, in particular with respect to restrictions on China-based companies raising capital offshore, may lead to additional regulatory
review in China over our financing and capital raising activities in the United States. In addition, we may be subject to industry-wide
regulations that may be adopted by the relevant PRC authorities, which may have the effect of limiting our service offerings, restricting
the scope of our operations in China, or causing the suspension or termination of our business operations in China entirely, all of which
will materially and adversely affect our business, financial condition and results of operations. We may have to adjust, modify, or completely
change our business operations in response to adverse regulatory changes or policy developments, and we cannot assure you that any remedial
action adopted by us can be completed in a timely, cost-efficient, or liability-free manner or at all.
 
On July 30, 2021, in response
to the recent regulatory developments in China and actions adopted by the PRC government, the Chairman of the SEC issued a statement asking
the SEC staff to seek additional disclosures from offshore issuers associated with China-based operating companies before their registration
statements will be declared effective. On August 1, 2021, the CSRC stated in a statement that it had taken note of the new disclosure
requirements announced by the SEC regarding the listings of Chinese companies and the recent regulatory development in China, and that
both countries should strengthen communications on regulating China-related issuers. To the best knowledge of this Company, as of the
date of this Report, current Chinese laws and regulations do not forbid us from issuing securities overseas. On December 24, 2021, the
CSRC published the Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Draft Administrative Provisions”)
and the Administration Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (the “Draft Filing
Measures”). The Draft Administrative Provisions and the Draft Filing Measures lay out requirements for filing and include unified
regulation management, strengthening regulatory coordination, and cross-border regulatory cooperation. On February 17, 2023, the CSRC
promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”),
which took effect on March 31, 2023. On the same date, the CSRC circulated Supporting Guidance Rules No. 1 through No. 5, Notes on the
Trial Measures, Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises and relevant CSRC Answers
to Reporter Questions, or collectively, the Guidance Rules and Notice, on CSRC’s official website. The Trial Measures, together
with the Guidance Rules and Notice reiterate the basic principles of the Draft Administrative Provisions and Draft Filing Measures and
impose substantially the same requirements for the overseas securities offering and listing by domestic enterprises, and clarified and
emphasized several aspects, which include but are not limited to: (1) criteria to determine whether an issuer will be required to go through
the filing procedures under the Trial Measures; (2) exemptions from immediate filing requirements for issuers including those that have
already been listed in foreign securities markets, including U.S. markets, prior to the effective date of the Trial Measures, but these
issuers shall still be subject to filing procedures if they conduct refinancing or are involved in other circumstances that require filing
with the CSRC; (3) a negative list of types of issuers banned from listing or offering overseas, such as issuers whose affiliates have
been recently convicted of bribery and corruption; (4) issuers’ compliance with web security, data security, and other national
security laws and regulations; (5) issuers’ filing and reporting obligations, such as obligation to file with the CSRC after it
submits an application for initial public offering to overseas regulators, and obligation after offering or listing overseas to file with
the CSRC after it completes subsequent offerings and to report to the CSRC material events including change of control or voluntary or
forced delisting of the issuer; and (6) the CSRC’s authority to fine both issuers and their relevant shareholders for failure to
comply with the Trial Measures, including failure to comply with filing obligations or committing fraud and misrepresentation. Specifically,
pursuant to the Trial Measures, our future securities offerings in the Nasdaq Capital Market where we have previously offered and listed
shall also be filed with the CSRC within 3 working days after the offering is completed. The Trial Measures provide the CSRC with power
to warn, fine, and issue injunctions against both PRC domestic companies, their controlling shareholders, and their advisors in listing
or offering securities (collectively, the “Subject Entities”), as well as individuals directly responsible for these Subject
Entities (the “Subject Individuals”). For failure to comply with the Trial Measures Negative List or the Trial Measures Filing
Obligations, or materially false or misleading statements in the filing and reporting required by the Trial Measures: (1) PRC domestic
companies, and their controlling shareholders if the controlling shareholders induced the PRC domestic companies’ failure to comply,
severally, may face warnings, injunctions to comply, and fines between RMB1 million and RMB10 million ($138,408 and $1,384,083); the Subject
Individuals in these entities may severally, face warnings and fines between RMB0.5 million and RMB5 million ($69,204 and $692,040). (2)
Advisors in listing or offering securities that failed to dutifully advise the PRC domestic companies and their controlling shareholders
in complying with the Trial Measures and caused such failures to comply can face warnings and fines between RMB0.5 million and RMB5 million
($69,204 and $692,040); the Subject Individuals in these advisor entities may, severally, face warnings and fines between RMB0.2 million
and RMB2 million ($27,682 and $276,820). As the Trial Measures are newly issued, there remain uncertainties regarding its interpretation
and implementation. Therefore, we cannot assure you that we will be able to complete the filings for our future offerings and fully comply
with the relevant new rules on a timely basis, if at all. In addition, we cannot guarantee that we will not be subject to tightened regulatory
review and we could be exposed to government interference in China.
 


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Since 1979, PRC legislation
and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China
has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of
economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume
of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties.
In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely
basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until
some time after the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of
resources and management attention.
 
Compliance with China’s new Data Security
Law, Measures on Cybersecurity Review, Personal Information Protection Law, regulations and guidelines relating to the multi-level protection
scheme and any other future laws and regulations may entail significant expenses and could materially affect our business.
 
China has implemented or
will implement rules and is considering a number of additional proposals relating to data protection. China’s Data Security Law
promulgated by the SCNPC in June 2021, took effect in September 2021. The Data Security Law provides that the data processing activities
must be conducted based on “data classification and hierarchical protection system” for the purpose of data protection and
prohibits entities in China from transferring data stored in China to foreign law enforcement agencies or judicial authorities without
prior approval by the Chinese government. As the Data Security Law has not yet come into effect, we may need to make adjustments to our
data processing practices to comply with this law.
 
Additionally, China’s
Cyber Security Law, requires companies to take certain organizational, technical and administrative measures and other necessary measures
to ensure the security of their networks and data stored on their networks. Specifically, the Cyber Security Law provides that China adopt
a multi-level protection scheme (MLPS), under which network operators are required to perform obligations of security protection to ensure
that the network is free from interference, disruption or unauthorized access, and prevent network data from being disclosed, stolen or
tampered. Under the MLPS, entities operating information systems must have a thorough assessment of the risks and the conditions of their
information and network systems to determine the level to which the entity’s information and network systems belong-from the lowest
Level 1 to the highest Level 5 pursuant to the Measures for the Graded Protection and the Guidelines for Grading of Classified Protection
of Cyber Security. The grading result will determine the set of security protection obligations that entities must comply with. Entities
classified as Level 2 or above should report the grade to the relevant government authority for examination and approval.
 
The CAC has taken action
against several Chinese internet companies in connection with their initial public offerings on U.S. securities exchanges, for alleged
national security risks and improper collection and use of the personal information of Chinese data subjects. According to the official
announcement, the action was initiated based on the National Security Law, the Cyber Security Law and the Measures on Cybersecurity Review,
which are aimed at “preventing national data security risks, maintaining national security and safeguarding public interests.”
 
It is unclear at the present
time how widespread the cybersecurity review requirement and the enforcement action will be and what effect they will have on the life
sciences sector generally and the Company in particular. China’s regulators may impose penalties for non-compliance ranging from
fines or suspension of operations, and this could lead to us delisting from the U.S. stock market.
 
Also, on August 20, 2021,
the SCNPC promulgated the Personal Information Protection Law, started to be implemented on November 1, 2021. The law creates a comprehensive
set of data privacy and protection requirements that apply to the processing of personal information and expands data protection compliance
obligations to cover the processing of personal information of persons by organizations and individuals in China, and the processing of
personal information of persons in China outside of China if such processing is for purposes of providing products and services to, or
analyzing and evaluating the behavior of, persons in China. The law also proposes that critical information infrastructure operators and
personal information processing entities who process personal information meeting a volume threshold to-be-set by Chinese cyberspace regulators
are also required to store in China personal information generated or collected in China, and to pass a security assessment administered
by Chinese cyberspace regulators for any export of such personal information. Lastly, the draft contains proposals for significant fines
for serious violations of up to RMB50 million or 5% of annual revenues from the prior year.
 


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Interpretation, application
and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation,
amendments to existing legislation and changes in enforcement. Compliance with the Cyber Security Law and the Data Security Law could
significantly increase the cost to us of providing our service offerings, require significant changes to our operations or even prevent
us from providing certain service offerings in jurisdictions in which we currently operate or in which we may operate in the future. Despite
our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information security,
and our belief that we are currently in compliance therewith, it is possible that our practices, offerings or platform could fail to meet
all of the requirements imposed on us by the Cyber Security Law, the Data Security Law and/or related implementing regulations. Any failure
on our part to comply with such law or regulations or any other obligations relating to privacy, data protection or information security,
or any compromise of security that results in unauthorized access, use or release of personally identifiable information or other data,
or the perception or allegation that any of the foregoing types of failure or compromise has occurred, could damage our reputation, discourage
new and existing counterparties from contracting with us or result in investigations, fines, suspension or other penalties by Chinese
government authorities and private claims or litigation, any of which could materially adversely affect our business, financial condition
and results of operations. Even if our practices are not subject to legal challenge, the perception of privacy concerns, whether or not
valid, may harm our reputation and brand and adversely affect our business, financial condition and results of operations. Moreover, the
legal uncertainty created by the Data Security Law and the recent Chinese government actions could materially adversely affect our ability,
on favorable terms, to raise capital, including engaging in follow-on offerings of our securities in the U.S. market or the Stock Exchange
of Hong Kong. While we believe that our current operations are in compliance with the laws and regulations of the Cyberspace Administration
of China, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to its
business or industry.
 
Recent greater oversight by the CAC over
data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business and our offering.
 
On December 28, 2021, the
CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures, which took effect on February
15, 2022. The Cybersecurity Review Measures provide that, in addition to critical information infrastructure operators (“CIIOs”)
that intend to purchase Internet products and services, online platform operators engaging in data processing activities that affect or
may affect national security must be subject to cybersecurity review by the Cybersecurity Review Office of the PRC. According to the Cybersecurity
Review Measures, a cybersecurity review assesses potential national security risks that may be brought about by any procurement, data
processing, or overseas listing. The Cybersecurity Review Measures require that an online platform operator which possesses the personal
information of at least one million users must apply for a cybersecurity review by the CAC if it intends to be listed in foreign countries.
 
On November 14, 2021, the
CAC promulgated the draft Regulations on the Administration of Cyber Data Security for public comment, pursuant to which data processors
conducting certain activities must apply for cybersecurity review. The draft regulations also require that data processors processing
important data or going public overseas shall conduct an annual data security self-assessment or entrust a data security service institution
to do so, and submit the data security assessment report of the previous year to the local branch of the CAC before January 31 each year.
Further, the draft regulations would require internet platform operators to establish platform rules, privacy policies and algorithm strategies
related to data, and solicit public comments on their official websites and personal information protection related sections for no less
than 30 working days when they formulate platform rules or privacy policies or makes any amendments that may have a significant impact
on users’ rights and interests. In addition, platform rules and privacy policies formulated by operators of large internet platforms
with more than 100 million daily active users, or amendments to such rules or policies by operators of large internet platforms with more
than 100 million daily active users that may have significant impacts on users’ rights and interests shall be evaluated by a third-party
organization designated by the CAC and reported to local branch of the CAC for approval. The CAC has solicited comments on this draft
until December 13, 2021, but there is no definite timetable as to when the draft regulations will be enacted. As such, substantial uncertainties
exist with respect to the enactment timetable, final content, interpretation and implementation of such regulations.
 


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We have made our determinations
based on Yuantai Law Offices, our PRC counsel, to the extent that the discussion relates to matters of CSRC, CAC and other government
authorities on our PRC subsidiaries’ operations and concluded that: as of the date of this Report, we, our PRC subsidiaries and
equity investee company, (i) are not required to obtain permissions from the CSRC, CAC or any other government authorities on our PRC
subsidiaries’ operations, and (ii) have not received or were denied such permissions by any PRC government authorities. If the Security
Administration Draft is enacted as proposed, we believe that the operations of our PRC subsidiaries and our listing will not be affected
and that we will not be subject to cybersecurity review by the CAC, given that our PRC subsidiaries possess personal data of fewer than
one million individual clients and do not collect data that affects or may affect national security in their business operations as of
the date of this Report and do not anticipate that they will be collecting over one million users’ personal information or data
that affects or may affect national security in the near future. There remains uncertainty, however, as to how the Cybersecurity Review
Measures and the Security Administration Draft will be interpreted or implemented and whether the PRC regulatory agencies, including the
CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures
and the Security Administration Draft. If any such new laws, regulations, rules, or implementation and interpretation come into effect,
we will take all reasonable measures and actions to comply and to minimize the adverse effect of such laws on us. We cannot guarantee,
however, that we will not be subject to cybersecurity review and network data security review in the future. During such reviews, we may
be required to suspend our operation or experience other disruptions to our operations. Cybersecurity review and network data security
review could also result in negative publicity with respect to our Company and diversion of our managerial and financial resources, which
could materially and adversely affect our business, financial conditions, and results of operations.
 
As of the date of this Report,
we have not received any notice from any authorities identifying our PRC subsidiaries as CIIOs. However, given the uncertainties surrounding
the interpretation and implementation of the Cyber Security Law, Data Security Law and relevant regulations, we cannot rule out the
possibility that we, or certain of our customers or suppliers may be deemed as a CIIO, or an operator processing “important
data.” First, if we are deemed as a CIIO, our purchase of network products or services, if deemed to be affecting or may affect
national security, will need to be subject to cybersecurity review, before we can enter into agreements with relevant customers or suppliers,
and before the conclusion of such procedure, these customers will not be allowed to use our products or services, and we are not allowed
to purchase products or services from our suppliers. There can be no assurance that we would be able to complete the applicable cybersecurity
review procedures in a timely manner, or at all, if we are required to follow such procedures. Any failure or delay in the completion
of the cybersecurity review procedures may prevent us from using certain network products and services, and may result in fines of up
to ten times the purchase price of such network products and services being imposed upon us, if we are deemed a CIIO using network
products or services without having completed the required cybersecurity review procedures. If the reviewing authority is of the view
that the use of such network products or services by us, or by certain of our customers or suppliers, involves risk of disruption, is
vulnerable to external attacks, or may negatively affect, compromise, or weaken the protection of national security, we may not be able
to provide such products or services to relevant customers, or purchase products or services from relevant suppliers. This could have
a material adverse effect on our results of operations and business prospects. Second, the notion of “important data” is not
clearly defined by the Cyber Security Law or the Data Security Law. In order to comply with the statutory requirements, we will need to
determine whether we possess important data, monitor the important data catalogs that are expected to be published by local governments
and departments, perform risk assessments and ensure we are complying with reporting obligations to applicable regulators. We may also
be required to disclose to regulators business-sensitive or network security-sensitive details regarding our processing of important data,
and may need to pass the government security review or obtain government approval in order to share important data with offshore recipients,
which can include foreign licensors, or share data stored in China with judicial and law enforcement authorities outside of China. If
judicial and law enforcement authorities outside China require us to provide data stored in China, and we are not able to pass any required
government security review or obtain any required government approval to do so, we may not be able to meet the foreign authorities’
requirements. The potential conflicts in legal obligations could have adverse impact on our operations in and outside of China.
 
We may be adversely affected by the complexity,
uncertainties and changes in PRC regulation of internet-related businesses and companies, and any lack of requisite approvals, licenses
or permits applicable to our business may have a material adverse effect on our business and results of operations.
 
The PRC government extensively
regulates the internet industry, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in
the internet industry. These internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement
involve significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may
be deemed to be in violation of applicable laws and regulations.
 


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The evolving PRC regulatory
system for the internet industry may lead to the establishment of new regulatory agencies. For example, in May 2011, the State Council
announced the establishment of a new department, the State Internet Information Office (with the involvement of the State Council Information
Office, the MIIT, and the MPS). The primary role of this new agency is to facilitate the policy-making and legislative development in
this field, to direct and coordinate with the relevant departments in connection with online content administration and to deal with cross-ministry
regulatory matters in relation to the internet industry.
 
The Circular on Strengthening
the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, issued by the MIIT in July 2006,
prohibits domestic telecommunication service providers from leasing, transferring or selling telecommunications business operating licenses
to any foreign investor in any form, or providing any resources, sites or facilities to any foreign investor for their illegal operation
of a telecommunications business in China. According to this circular, either the holder of a value-added telecommunication services operation
permit or its shareholders must directly own the domain names and trademarks used by such license holders in their provision of value-added
telecommunication services. The circular also requires each license holder to have the necessary facilities, including servers, for its
approved business operations and to maintain such facilities in the regions covered by its license.
 
The interpretation and application
of existing PRC laws, regulations and policies and possible new laws, regulations or policies relating to the internet industry have created
substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of,
internet businesses in China, including our business. We cannot assure you that we have obtained all the permits or licenses required
for conducting our business in China or will be able to maintain our existing licenses or obtain new ones. If the PRC government considers
that we were operating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional
approvals or licenses or imposes additional restrictions on the operation of any part of our business, it has the power, among other things,
to levy fines, confiscate our income, revoke our business licenses, and require us to discontinue our relevant business or impose restrictions
on the affected portion of our business. Any of these actions by the PRC government may have a material adverse effect on our business
and results of operations.
 
PRC regulation of loans to and direct investment
in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds
of from our public offerings to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially
and adversely affect our liquidity and our ability to fund and expand our business.
 
Under PRC laws and regulations,
we are permitted to utilize the proceeds from our public offerings to fund our PRC subsidiaries by making loans to or additional capital
contributions to our PRC subsidiaries, subject to applicable government registration and approval requirements.
 
Any loans to our PRC subsidiaries,
which are treated as foreign-invested enterprises under PRC laws, are subject to PRC regulations and foreign exchange loan registrations.
For example, loans by us to our PRC subsidiaries to finance their activities cannot exceed statutory limits and must be registered with
the local counterpart of SAFE. The statutory limit for the total amount of foreign debts of a foreign-invested company is the difference
between the amount of total investment as approved by the MOFCOM or its local counterpart and the amount of registered capital of such
foreign-invested company or 2.5 times of the net assets of such foreign-invested company.
 


53
 

 
We have financed and expect
to continue to finance our PRC subsidiaries by means of capital contributions. These capital contributions must be approved by the MOFCOM
or its local counterpart. In addition, SAFE issued a circular in September 2008, SAFE Circular 142, regulating the conversion by a foreign-invested
enterprise of foreign currency registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides
that the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes
within the business scope approved by the applicable government authority and unless otherwise provided by law, may not be used for equity
investments within the PRC. On July 4, 2014, the SAFE issued the Circular of the SAFE on Relevant Issues Concerning the Pilot Reform in
Certain Areas of the Administrative Method of the Conversion of Foreign Exchange Funds by Foreign-invested Enterprises, or SAFE Circular
36, which launched a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises
in certain designated areas from August 4, 2014 and some of the restrictions under SAFE Circular 142 will not apply to the settlement
of the foreign exchange capitals of the foreign-invested enterprises established within the designate areas and such enterprises are allowed
to use its RMB capital converted from foreign exchange capitals to make equity investment. On March 30, 2015, SAFE promulgated Circular
19, to expand the reform nationwide. Circular 19 came into force and replaced both Circular 142 and Circular 36 on June 1, 2015. Circular
19 allows foreign-invested enterprises to make equity investments by using RMB fund converted from foreign exchange capital. However,
Circular 19 continues to prohibit foreign-invested enterprises from, among other things, using RMB fund converted from its foreign exchange
capitals for expenditure beyond its business scope, providing entrusted loans or repaying loans between non-financial enterprises. In
addition, SAFE strengthened its oversight of the flow and use of the RMB capital converted from foreign currency registered capital of
a foreign-invested company. The use of such RMB capital may not be altered without SAFE’s approval, and such RMB capital may not
in any case be used to repay RMB loans if the proceeds of such loans have not been used. On June 9, 2016, SAFE issued the Circular on
Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts (“Circular 16”), which
became effective simultaneously. Pursuant to Circular 16, enterprises registered in the PRC may also convert their foreign debts from
foreign currency to RMB on self-discretionary basis. Circular 16 provides an integrated standard for conversion of foreign exchange under
capital account items (including but not limited to foreign currency capital and foreign debts) on self-discretionary basis which applies
to all enterprises registered in the PRC. Circular 16 reiterates the principle that RMB converted from foreign currency-denominated capital
of a company may not be directly or indirectly used for purpose beyond its business scope or prohibited by PRC Laws or regulations, while
such converted RMB shall not be provide as loans to its non-affiliated entities. SAFE has not provided detailed guidelines with respect
to its interpretation or implementation, it is uncertain how these rules will be interpreted and implemented. Violations of these Circulars
could result in severe monetary or other penalties. These circulars may significantly limit our ability to use RMB converted from the
net proceeds of our public offerings to fund the establishment of new entities in China by our PRC subsidiaries, to invest in or acquire
any other PRC companies through our PRC subsidiaries.
 
As March 31, 2024, the Company
has made accumulated capital contributions and loans of $21.1 million and $2.1 million directly to the subsidiaries, respectively. The
contributions were generated from our historical offering proceeds. Besides, the Company also loaned accumulated approximately $1.7 million
to the equity investee company, Jinkailong, through our subsidiaries in PRC in prior years. The loans were from the daily operation of
these subsidiaries.
 
In light of the various requirements
imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that
we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if
at all, with respect to future capital contributions or future loans by us to our PRC subsidiaries. If we fail to complete such registrations
or obtain such approvals, our ability to use the proceeds we expect to receive from our public offerings and to capitalize or otherwise
fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund
and expand our business.
 
We rely on dividends and other distributions
on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our
PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.
 
We are a holding company,
and we rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements, including
the funds necessary to pay dividends and other cash distributions to our stockholders and service any debt we may incur. If our PRC subsidiaries
incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other
distributions to us.
 
Under PRC laws and regulations,
our PRC subsidiaries, as a wholly foreign-owned enterprise in China, may pay dividends only out of their respective accumulated after-tax
profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required
to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate
amount of such funds reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion
of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and
bonus funds are not distributable as cash dividends.
 


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Our PRC subsidiaries currently
suffer accumulated loss and are unable to pay us any dividend given their financial condition. If our PRC subsidiaries’ financial
condition improves, the above discussed PRC laws will likely limit their ability to pay dividends or make other distributions to us. Such
limitations could materially and adversely impact our cash flows and limit our ability to grow, make investments or acquisitions that
could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.
 
Fluctuations in exchange rates could have
a material adverse effect on our results of operations and the value of your investment.
 
Substantially all of our
revenues and expenditures are denominated in RMB, whereas our reporting currency is the U.S. dollar. As a result, fluctuations in the
exchange rate between the U.S. dollar and RMB will affect the relative purchasing power in RMB terms of our U.S. dollar assets and the
proceeds from our public offerings. Our reporting currency is the U.S. dollar while the functional currency for our PRC subsidiaries is
RMB. Gains and losses from the re-measurement of assets and liabilities that are receivable or payable in RMB are included in our consolidated
statements of operations. The re-measurement has caused the U.S. dollar value of our results of operations to vary with exchange rate
fluctuations, and the U.S. dollar value of our results of operations will continue to vary with exchange rate fluctuations. A fluctuation
in the value of RMB relative to the U.S. dollar could reduce our profits from operations and the translated value of our net assets when
reported in U.S. dollars in our financial statements. This could have a negative impact on our business, financial condition or results
of operations as reported in U.S. dollars. If we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends
on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on
the U.S. dollar amount available to us. In addition, fluctuations in currencies relative to the periods in which the earnings are generated
may make it more difficult to perform period-to-period comparisons of our reported results of operations.
 
The value of the RMB against
the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions and
China’s foreign exchange policies. It is difficult to predict how long such depreciation of RMB against the U.S. dollar may last
and when and how the relationship between the RMB and the U.S. dollar may change again.
 
There remains significant
international pressure on the PRC government to adopt a flexible currency policy. Any significant appreciation or depreciation of the
RMB may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on,
our securities in U.S. dollars. For example, to the extent that we need to convert U.S. dollars we receive from our public offerings into
RMB to pay our operating expenses, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we would
receive from the conversion. Conversely, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S.
dollar equivalent of our earnings, which in turn could adversely affect the price of our securities.
 
Very limited hedging options
are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions
in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future,
the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In
addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into
foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.
 
Governmental control of currency conversion
may limit our ability to utilize our net revenues effectively and affect the value of your investment.
 
The PRC government imposes
controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive
substantially all of our net revenues in RMB. Under our current corporate structure, we rely on dividend payments from our PRC subsidiaries
to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account
items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without
prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiaries are able to pay dividends
in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of
the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the beneficial
owners of our company who are PRC residents. But approval from or registration with appropriate government authorities is required where
RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated
in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account
transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency
demands, we may not be able to pay dividends in foreign currencies to our stockholders.
 


55
 

 
Failure to make adequate contributions to
various employee benefit plans as required by PRC regulations may subject us to penalties.
 
We are required under PRC
laws and regulations to participate in various government sponsored employee benefit plans, including certain social insurance, housing
funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries,
including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations
where we operate our businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments
in China given the different levels of economic development in different locations. We have not made adequate employee benefit payments.
As of March 31, 2024 and 2023, we did not make adequate employee benefit contributions in the amount of $1,137,887 and $1,086,526, respectively,
for our continuing operations. We accrued the amount in accrued payroll and welfare. We may be required to make up the contributions for
these plans as well as to pay late fees and fines. If we are subject to late fees or fines in relation to the underpaid employee benefits,
our financial condition and results of operations may be adversely affected.
 
The M&A Rules and certain other PRC
regulations establish complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult
for us to pursue growth through acquisitions in China.
 
The Rules on Mergers and
Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”) and some other regulations and rules concerning
mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign
investors more time consuming and complex, including requirements in some instances that the MOFCOM be notified in advance of any change-of-control
transaction in which a foreign investor takes control of a PRC domestic enterprise. Moreover, the Anti-Monopoly Law requires that the
MOFCOM shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. In addition, the security
review rules issued by the MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign investors that
raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de
facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and
the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or
contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements
of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval
processes, including obtaining approval from the MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions,
which could affect our ability to expand our business or maintain our market share.
 
If the chops of our PRC subsidiaries are
not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities
could be severely and adversely compromised.
 
In China, a company chop
or seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature. Each legally registered
company in China is required to maintain a company chop, which must be registered with the local Public Security Bureau. In addition to
this mandatory company chop, companies may have several other chops which can be used for specific purposes. The chops of our PRC subsidiaries
are generally held securely by personnel designated or approved by us in accordance with our internal control procedures. To the extent
those chops are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance
of these entities could be severely and adversely compromised and those corporate entities may be bound to abide by the terms of any documents
so chopped, even if they were chopped by an individual who lacked the requisite power and authority to do so. In addition, if the chops
are misused by unauthorized persons, we could experience disruption to our normal business operations. We may have to take corporate or
legal action, which could involve significant time and resources to resolve while distracting management from our operations.
 
Any failure to comply with PRC regulations
regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other
legal or administrative sanctions.
 
In February 2012, SAFE promulgated
the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of
Overseas Publicly-Listed Companies, replacing earlier rules promulgated in March 2007. Pursuant to these rules, PRC citizens and non-PRC
citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas
publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could
be the PRC subsidiaries of such overseas listed company, and complete certain other procedures. In addition, an overseas entrusted institution
must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests.
We and our executive officers and other employees who are PRC citizens or who have resided in the PRC for a continuous period of not less
than one year and who are granted options or other awards under our 2018 Equity Incentive Plan will be subject to these regulations. Failure
to complete the SAFE registrations may subject them to fines and legal sanctions and may also limit our ability to contribute additional
capital into our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to us. We also face regulatory
uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees
under PRC law.
 


56
 

 
PRC regulations relating to offshore investment
activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to
us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.
 
SAFE promulgated the SAFE
Circular 37 in July 2014 that requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment
or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities
must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic
information (including change of such PRC citizens or residents, name and operation term), increases or decreases in investment amount,
transfers or exchanges of shares, or mergers or divisions. SAFE Circular 37 is issued to replace the Notice on Relevant Issues Concerning
Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles,
or SAFE Circular 75. SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning
Direct Investment in February 2015, which took effect on June 1, 2015. This notice has amended SAFE Circular 37 requiring PRC residents
or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of
an offshore entity established for the purpose of overseas investment or financing.
 
If our stockholders who are
PRC residents or entities do not complete their registration as required, our PRC subsidiaries may be prohibited from distributing their
profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute
additional capital to our PRC subsidiaries. Moreover, failure to comply with the SAFE registration described above could result in liability
under PRC laws for evasion of applicable foreign exchange restrictions.
 
To our knowledge, all of
our pre-IPO PRC stockholders who are subject to the registration requirements of Circular 37 have completed the required foreign exchange
registrations.
 
In addition, we may not be
informed of the identities of all the PRC residents or entities holding direct or indirect interest in our company, nor can we compel
our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you that all of our stockholders or
beneficial owners who are PRC residents or entities have complied with, and will in the future make or obtain any applicable registrations
or approvals required by, SAFE regulations. Failure by such stockholders or beneficial owners to comply with SAFE regulations, or failure
by us to amend the foreign exchange registrations of our PRC subsidiaries, could subject us to fines or legal sanctions, restrict our
overseas or cross-border investment activities, limit our PRC subsidiaries’ ability to make distributions or pay dividends to us
or affect our ownership structure, which could adversely affect our business and prospects.
 
Risks Related to Our Securities
 
Our failure to meet the continued listing requirements of Nasdaq
could result in a delisting of our common stock.
 
Our common stock is currently
listed for trading on The Nasdaq Capital Market, and the continued listing of our common stock on The Nasdaq Capital Market is subject
to our compliance with a number of listing standards. On August 16, 2021, we received a notice from Nasdaq that because the closing bid
price for our common stock had fallen below $1.00 per share for 30 consecutive business days, we no longer complied with the $1.00 minimum
bid price requirement for continued listing on The Nasdaq Capital Market under Rule 5550(a)(2) of the Nasdaq Listing Rules. On February
15, 2022, we received a letter from Nasdaq informing that trading of the Company’s common stock will be suspended at the opening
of business on February 24, 2022, unless the Company requests an appeal of Nasdaq’s determination. The Company has timely requested
an appeal and on May 5, 2022, the Nasdaq Hearings Panel (the “Panel”) confirmed the Company has regained compliance with the
minimum bid price through a reserve stock split effective on April 6, 2022. The Panel has also determined to impose a Panel Monitor for
a period of one year from the date of the letter, or until May 5, 2023 to monitor the Company’s continued compliance with all Nasdaq
continued listing requirements, pursuant to Nasdaq Listing Rule 5815(d)(4)(A). Should the Company fail to meet the minimum bid price requirement
for a period of 30 consecutive trading days or any other requirements for continued listing on Nasdaq, the staff will issue a Delist Determination
Letter and promptly schedule a new hearing. On May 8, 2023, we received a notice from Nasdaq to inform the Company was in compliance with
the applicable Nasdaq Listing Rules. On June 15, 2023, we received a notice from Nasdaq that because the closing bid price for our common
stock had fallen below $1.00 per share for 30 consecutive business days, we no longer complied with the $1.00 minimum bid price requirement
for continued listing on The Nasdaq Capital Market under Rule 5550(a)(2) of the Nasdaq Listing Rules. On March 26, 2024, we received a
letter from the Nasdaq notifying us that we have regained compliance with the Nasdaq Capital Market’s minimum bid price requirement
and the matter is closed.
 


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If our common stock were
no longer listed on The Nasdaq Capital Market, investors might only be able to trade on one of the over-the-counter markets. This would
impair the liquidity of our common stock not only in the number of shares that could be bought and sold at a given price, which might
be depressed by the relative illiquidity, but also through delays in the timing of transactions and reduction in media coverage. In addition,
we could face significant material adverse consequences, including:
 

●a limited availability of market quotations for our securities;
   


●a limited amount of news and analyst coverage for us; and
   


●a decreased ability to issue additional securities or obtain additional financing in the future.
 
We may take actions to maintain
our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow
our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock or prevent future non-compliance
with Nasdaq’s listing requirements.
 
The market price for our common stock may
be volatile.
 
The trading prices of our
common stock are likely volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market
and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results
of internet or other companies based in China that have listed their securities in the United States in recent years. The securities of
some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial
decline in their trading prices. The trading performances of other Chinese companies’ securities after their offerings may affect
the attitudes of investors toward Chinese companies listed in the United States, which consequently may impact the trading performance
of our common stock, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate
governance practices or fraudulent accounting, corporate structure or other matters of other Chinese companies may also negatively affect
the attitudes of investors towards Chinese companies in general, including us, regardless of whether we have conducted any inappropriate
activities. In addition, securities markets may from time to time experience significant price and volume fluctuations that are not related
to our operating performance, which may have a material adverse effect on the market price of our common stock.
 
In addition to the above
factors, the price and trading volume of our common stock may be highly volatile due to multiple factors, including the following:
 

●regulatory developments affecting us, our customers, or our industry;
   


●announcements of studies and reports relating to our loan products and service offerings or those of our
competitors;
   


●changes in the economic performance or market valuations of other online finance marketplaces;
   


●actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of
our expected results;
   


●changes in financial estimates by securities research analysts;
   


●conditions in the automobile finance and ride-hailing industries in China;
 


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●announcements by us or our competitors of new product and service offerings, acquisitions, strategic relationships,
joint ventures or capital commitments;
   


●additions to or departures of our senior management;
   


●detrimental negative publicity about us, our management or our industry;
   


●fluctuations of exchange rates between the RMB and the U.S. dollar;
   


●release or expiry of lock-up or other transfer restrictions on our outstanding shares of common stock;
and
   


●sales or perceived potential sales of additional shares of common stock.
 
We have a significant number of outstanding
warrants, some of which contain full-ratchet anti-dilution protection and reset provisions, which may cause significant dilution to our
stockholders, have a material adverse impact on the market price of our common stock and make it more difficult for us to raise funds
through future equity offerings.
 
Pursuant to the Purchase
Agreements with investors in our offerings in June 2019, May 2021 and November 2021, we issued to the investors a series of warrants.
The issuance of shares of common stock upon the exercise of the warrants would dilute the percentage ownership interest of all stockholders,
might dilute the book value per share of our common stock and would increase the number of our publicly traded shares, which could depress
the market price of our common stock. In addition, the so-called full-ratchet anti-dilution protections and reset provisions, subject
to limited exceptions, would reduce the exercise price of the warrants in the event that we in the future issue common stock, or securities
convertible into or exercisable to purchase common stock, at a lower price per share.
 
As of the date of this Report,
there were 6,045,663 shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $2.25
per share, and we may issue additional options, warrants and other types of equity in the future as part of stock-based compensation,
capital raising transactions or other strategic transactions. To the extent these options and warrants are ultimately exercised, existing
holders of our common stock would experience dilution which may cause the price of our common stock to decline.
 
In addition to the dilutive
effects described above, the perceived risk of dilution as a result of the significant number of outstanding warrants may cause our common
stockholders to be more inclined to sell their shares, which would contribute to a downward movement in the price of our common stock.
Moreover, the perceived risk of dilution and the resulting downward pressure on our common stock price could encourage investors to engage
in short sales of our common stock, which could further contribute to price declines in our common stock. The fact that our stockholders,
warrant holders and option holders can sell substantial amounts of our common stock in the public market, whether or not sales have occurred
or are occurring, as well as the existence of full-ratchet anti-dilution provisions and reset provisions in a substantial number of our
outstanding warrants could make it more difficult for us to raise additional funds through the sale of equity or equity-related securities
in the future at a time and price that we deem reasonable or appropriate, or at all.
 
Certain judgments obtained against us by our stockholders may
not be enforceable.
 
We conduct substantially
all of our operations in China and substantially all of our assets are located in China. In addition, most of our directors and executive
officers reside within China, and most of the assets of these persons are located within China. As a result, it may be difficult or impossible
for you to effect service of process within the United States upon these individuals, or to bring an action against us or against these
individuals in the United States in the event that you believe your rights have been infringed under the U.S. federal securities laws
or otherwise. Even if you are successful in bringing an action of this kind, the laws of the PRC may render you unable to enforce a judgment
against our assets or the assets of our directors and officers.
 


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Our articles of incorporation and by-laws
could deter a change of our management, which could discourage or delay offers to acquire us.
 
Certain provisions of our
articles of incorporation (the “Articles of Incorporation”) and by-laws could discourage or make it more difficult to accomplish
a proxy contest or other change in our management or the acquisition of control by a holder of a substantial amount of our voting stock.
It is possible that these provisions could make it more difficult to accomplish, or could deter transactions that stockholders may otherwise
consider to be in their best interests or in our best interests. These provisions include:
 

●requiring stockholders who wish to request a special meeting of the stockholders to disclose certain specified
information in such request and to deliver such request in a specific way within a certain timeframe, which may inhibit or deter stockholders
from requesting special meetings of the stockholders;
   


●requiring that stockholders who wish to act by written consent request a record date from us for such
action and such request must include disclosure of certain specified information, which may inhibit or deter stockholders from acting
by written consent;
   


●establishing the board as the sole entity to fill vacancies of the board, which lengthens the time needed
to elect a new majority of the board;
   


●establishing a two-thirds majority vote of the stockholders to remove a director from the board, as opposed
to a simple majority, which lengthens the time needed to elect a new majority of the board; and
   


●establishing that any person who acquires equity in us shall be deemed to have notice and consented to
the forum selection provision of our Bylaws requiring actions to be brought only in Nevada, which may inhibit or deter stockholders actions
(i) on behalf of us; (ii) asserting claims of breach of fiduciary duty by officers or directors of us; or (iii) arising out of the Nevada
Revised Statutes, and establishing more detailed disclosure in any stockholder’s advance notice to nominate a new member of the
board, including specified information regarding such nominee, which may inhibit or deter such nomination and lengthen the time needed
to elect a new majority of the board.
 
Because we do not expect to pay dividends
in the foreseeable future, you must rely on price appreciation of our common stock for return on your investment.
 
We currently intend to retain
most, if not all, of our available funds and any future earnings to fund the development and growth of our business. As a result, we do
not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our common stock as
a source for any future dividend income.
 
Our board of directors has
discretion as to whether to distribute dividends, subject to certain restrictions under Nevada law. Even if our board of directors decides
to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future
results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our
subsidiary, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly,
the return on your investment in our common stock will likely depend entirely upon any future price appreciation of our common stock.
 
Other General Risk Factors
 
We may need additional capital to pursue
business objectives and respond to business opportunities, challenges or unforeseen circumstances, and financing may not be available
on terms acceptable to us, or at all.
 
We
have been financing our Automobile Transaction and Related Services and Online Ride-hailing Platform Services through proceeds
from our IPO and follow-on public offerings, and borrowing from third parties and related parties. As we intend to continue to make investments
to support the growth of this business, we may require additional capital to pursue our business objectives and respond to business opportunities,
challenges or unforeseen circumstances, including developing new solutions and services, further enhance our risk management capabilities,
increasing our sales and marketing expenditures to improve brand awareness and engage automobile purchasers through expanded online channels,
enhancing our operating infrastructure and acquiring complementary businesses and technologies. To be in line with our strategy to cross
sell our automobile leasing business with the online ride-hailing platform services business, we may need to make additional capital contribution
for promotion activities as a result. Accordingly, we may need to engage in equity or debt financings to secure additional funds. However,
additional funds may not be available when we need them, on terms that are acceptable to us, or at all. Repayment of the debts may divert
a substantial portion of cash flow to repay principal and service interest on such debt, which would reduce the funds available for expenses,
capital expenditures, acquisitions and other general corporate purposes; and we may suffer default and foreclosure on our assets if our
operating cash flow is insufficient to service debt obligations, which could in turn result in acceleration of obligations to repay the
indebtedness and limit our sources of financing.
 


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Volatility in the credit
markets may also have an adverse effect on our ability to obtain debt financing. If we raise additional funds through further issuances
of equity or convertible debt securities, our existing shareholders could suffer significant dilution, and any new equity securities we
issue could have rights, preferences and privileges superior to those of holders of our common stock. If we are unable to obtain adequate
financing or financing on terms satisfactory to us when we require it, our ability to continue to pursue our business objectives and to
respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, financial
condition, results of operations and prospects could be adversely affected.
 
Fluctuations in interest rates could negatively
affect our results of operations.
 
We charge service fees to
automobile purchasers for facilitating financing transactions. If prevailing market interest rates increase, automobile purchasers would
be less likely to finance automobile purchases with credit or we may need to reduce our service fees to mitigate the impact of increased
interest rates. If we do not sufficiently lower our service fees and keep our fees competitive in such instances, automobile purchasers
may decide not to utilize our services because of our less competitive service fees and may take advantage of lower service fees offered
by other companies, and our ability to attract prospective automobile purchasers as well as our competitive position may be severely undermined.
On the other hand, if prevailing market interest rates decline, the operating margins of financial institutions may decrease, which may
make the financial institutions less likely to finance automobile purchases. Under either circumstance, our financial condition and profitability
could also be materially and adversely affected.
 
Our operating results may fluctuate significantly
and may not fully reflect the underlying performance of our business.
 
Our results of operations,
including the levels of our net revenues, expenses, net (loss)/income and other key metrics, may vary significantly in the future due
to a variety of factors, some of which are outside of our control, and period-to-period comparisons of our operating results may not be
meaningful, especially given our limited operating history. Accordingly, the results for any one quarter are not necessarily an indication
of future performance. Fluctuations in quarterly results may adversely affect the price of our common stock. Factors that may cause fluctuations
in our quarterly financial results include:
 

●our ability to attract new customers and maintain relationships with existing customers;
   


●our ability to maintain existing relationship with existing business partners and establish new relationships with additional partners
for our Automobile Transaction and Related Services and Online Ride-hailing Platform Services;
   


●the revenue generated from automobile leasing and online ride-hailing platform services;
   


●overdue ratios of automobile financing transactions we serve;
   


●financial institutions’ willingness and ability to fund financing transactions through us on reasonable terms;
   


●changes in our services and introduction of new products and services;
   


●the amount and timing of operating expenses related to acquiring customers and the maintenance and expansion of our business, operations
and infrastructure;
   


●our ability to manage transaction volume growth during the period;
   


●the timing of expenses related to the development or acquisition of technologies or businesses;
   


●network outages or security breaches;
 


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●general economic, industry and market conditions;
   


●our emphasis on customer experience instead of near-term growth; and
   


●the timing of expenses related to the development or acquisition of technologies or businesses.
 
If we fail to promote and maintain our brands in an effective
and cost-efficient way, our business and results of operations may be harmed.
 
We believe that developing
and maintaining awareness of our brands effectively is critical to attracting new and retaining existing customers. Successful promotion
of our brands and our ability to attract customers depend largely on the effectiveness of our marketing efforts and the success of the
channels we use to promote our services. Our efforts to build our brands have caused us to incur expenses, and it is likely that our future
marketing efforts will require us to incur additional expenses. These efforts may not result in increased revenues in the immediate future
or at all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to successfully promote and
maintain our brands while incurring substantial expenses, our results of operations and financial condition would be adversely affected,
which may impair our ability to grow our business.
 
Any harm to our brands or reputation or
any damage to the reputation of our business partners or other third parties, or the automobile financing or ride-hailing industries in
China may materially and adversely affect our business and results of operations.
 
Maintaining and enhancing
the recognition and reputation of our brands is critical to our business and competitiveness. Factors that are vital to this objective
include but are not limited to our ability to:
 

●maintain and develop relationships with dealers, leasing companies, ride-hailing platforms and financial
institutions;
   


●provide prospective and existing customers with superior experiences;
   


●enhance and improve our credit assessment and decision-making models;
   


●effectively manage and resolve any user complaints of financial institutions or customers; and
   


●effectively protect personal information and privacy of customers.
 
Any malicious or innocent
negative allegation made by the media or other parties about the foregoing or other aspects of our company, including but not limited
to our management, business, compliance with law, financial conditions or prospects, whether with merit or not, could severely hurt our
reputation and harm our business and operating results. As the markets for China’s automobile financing and online ride-hailing
are new and the regulatory framework for this market is also evolving, negative publicity about these markets may arise from time to time.
Negative publicity about China’s automobile financing and ride-hailing industries in general may also have a negative impact on
our reputation, regardless of whether we have engaged in any inappropriate activities.
 
In addition, certain factors
that may adversely affect our reputation are beyond our control. Negative publicity about our partners, outsourced service providers
or other counterparties, such as negative publicity about any failure by them to adequately protect the information of users, to comply
with applicable laws and regulations or to otherwise meet required quality and service standards could harm our reputation. Furthermore,
any negative development in any of the automobile financing or ride-hailing industries, such as bankruptcies or failures of other companies
in any of this these, and especially a large number of such bankruptcies or failures, or negative perception of any of the industries
as a whole, could compromise our image, undermine the trust and credibility we have established and impose a negative impact on our ability
to attract new clients. Negative developments in these industries, such as widespread automobile purchaser/borrower defaults, unethical
or illegal activities by industry players and/or the closure of companies providing similar services, may also lead to tightened regulatory
scrutiny of these sectors and limit the scope of permissible business activities that may be conducted by us. If any of the foregoing
takes place, our business and results of operations could be materially and adversely affected.
 


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 Our reputation may be harmed if information
supplied by customers is inaccurate, misleading or incomplete.
 
Our customers supply a variety
of information that is in the applications to financing partners. We do not verify all the information we receive from our customers,
and such information may be inaccurate or incomplete. If financing partners provide funding to the automobile purchasers based on information
supplied by automobile purchasers that is inaccurate, misleading or incomplete, those financing partners may not receive their expected
returns and our reputation may be harmed. Moreover, inaccurate, misleading or incomplete customer information could also potentially subject
us to liability as an intermediary under the PRC Contract Law. See “Business — Regulations.”
 
Misconduct, errors and failure to function
by our employees and third-party service providers could harm our business and reputation.
 
We are exposed to many types
of operational risks, including the risk of misconduct and errors by our employees and third-party service providers. Our business depends
on our employees and third-party service providers to interact with potential customers, process large numbers of transactions and support
the loan/lease payment collection process, all of which involve the use and disclosure of personal information. We could be materially
adversely affected if transactions were redirected, misappropriated or otherwise improperly executed, if personal information was disclosed
to unintended recipients or if an operational breakdown or failure in the processing of transactions occurred, whether as a result of
human error, purposeful sabotage or fraudulent manipulation of our operations or systems. In addition, the manner in which we store and
use certain personal information and interact with our customers is governed by various PRC laws. It is not always possible to identify
and deter misconduct or errors by employees or third-party service providers, and the precautions we take to detect and prevent this activity
may not be effective in controlling unknown or unmanaged risks or losses. If any of our employees or third-party service providers take,
convert or misuse funds, documents or data or fail to follow protocol when interacting with customers, we could be liable for damages
and subject to regulatory actions and penalties. We could also be perceived to have facilitated or participated in the illegal misappropriation
of funds, documents or data, or the failure to follow protocol, and therefore be subject to civil or criminal liability. Aggressive practices
or misconduct by any of our third-party service providers in the course of collecting loans could damage our reputation.
 
Furthermore, as we rely on
certain third-party service providers, such as third-party payment platforms and custody and settlement service providers, to conduct
our business, if these third-party service providers failed to function properly, we cannot assure you that we would be able to find an
alternative in a timely and cost-efficient manner or at all. Any of these occurrences could result in our diminished ability to operate
our business, potential liability to borrowers and investors, inability to attract borrowers and investors, reputational damage, regulatory
intervention and financial harm, which could negatively impact our business, financial condition and results of operations.
 
A severe or prolonged downturn in the Chinese
or global economy could materially and adversely affect our business and financial condition.
 
Any prolonged slowdown in
the Chinese or global economy may have a negative impact on our business, results of operations and financial condition. In particular,
general economic factors and conditions in China or worldwide, including the general interest rate environment and unemployment rates,
may affect automobile purchasers and lessees’ willingness to seek working opportunities and financing partners’ ability and
desire to provide financing. Economic conditions in China are sensitive to global economic conditions. The COVID-19 pandemic resulted
in declines in economic activities in China and other parts of the world and raised concerns about the prospects of the global economy.
There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks
and financial authorities of some of the world’s leading economies, including the United States and China. There have also been
concerns over unrest in Ukraine, the Middle East and Africa, which have resulted in volatility in financial and other markets. There have
also been concerns about the economic effect of the tensions in the relationship between China and the United States. If present Chinese
and global economic uncertainties persist, our business partners may suspend their collaboration or reduce their business with us. Adverse
economic conditions could also reduce the number of customers seeking to utilize our services. Should any of these situations occur, our
transaction volume will decline, and our business and financial conditions will be negatively impacted. Additionally, continued turbulence
in the international markets may adversely affect our ability to access the capital markets to meet liquidity needs. As of the date of
this Report, we are unable to assess the full impact of the outbreak on our business, results of operations and financial condition.
 

63
 

 
Our
ability to protect the confidential information of our customers may be adversely affected by cyber-attacks, computer viruses, physical
or electronic break-ins or similar disruptions.
 
We
collect, store and process certain personal and other sensitive data from our customers, which makes it an attractive target and potentially
vulnerable to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions. While we have taken steps to
protect the confidential information that we have access to, our security measures could be breached. Because techniques used to sabotage
or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target,
we may be unable to anticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches
or other unauthorized access to our operation systems could cause confidential user information to be stolen and used for criminal purposes.
Security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information,
time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee
error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with customers
could be severely damaged, we could incur significant liability and our business and operations could be adversely affected.
 
Moreover,
the platforms we cooperate with, which have their own apps, are facing an increasingly tense regulatory environment. With respect to
the security of information collected and used by mobile apps, the Announcement of Conducting Special Supervision against the Illegal
Collection and Use of Personal Information requires that these app operators shall collect and use personal information in compliance
with the Cyber Security Law, shall be responsible for the security of personal information obtained from users and take effective measures
to strengthen personal information protection. If they are investigated or fined by China’s Cyber Security Review Office, we may
be required to cooperate with the government and there is uncertainty as to the potential impact on our business.
 
We
may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
 
We
regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success,
and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality and non-compete agreements
with our employees and others to protect our proprietary rights. We have 19 software copyrights, 52 trademarks and two trademark applications
pending at the PRC Trademark Office. Thus, we cannot assure you that any of our intellectual property rights would not be challenged,
invalidated, circumvented or misappropriated, or such intellectual property will be sufficient to provide us with competitive advantages.
In addition, because of the rapid pace of technological change in our industries, parts of our business rely on technologies developed
or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties
on reasonable terms, or at all.
 
Intellectual
property protection may not be sufficient in the jurisdiction in China. Statutory laws and regulations are subject to judicial interpretation
and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality and
non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach.
Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China.
Preventing any unauthorized use of our intellectual property is difficult and costly and the steps we take may be inadequate to prevent
the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights,
such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance
that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently
discovered by, our competitors. To the extent that our employees or consultants use intellectual property owned by others in their work
for us, disputes may arise as to the rights in related know-how and inventions. Any failure in protecting or enforcing our intellectual
property rights could have a material adverse effect on our business, financial condition and results of operations.
 


64
 

 
We
may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
 
We
cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks,
patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future
subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party
trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other
aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property
rights against us in China, the United States or other jurisdictions. If any third-party infringement claims are brought against us,
we may be forced to divert management’s time and other resources from our business and operations to defend against these claims,
regardless of their merits.
 
Additionally,
the application and interpretation of China’s intellectual property right laws and the procedures and standards for granting trademarks,
patents, copyrights, know-how or other intellectual property rights in China are still evolving and are uncertain, and we cannot assure
you that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property
rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property,
and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations
may be materially and adversely affected.
 
Some
aspects of our digital operations include open source software, and any failure to comply with the terms of one or more of these open
source licenses could negatively affect our business.
 
Some
aspects of our digital operations include software covered by open source licenses. The terms of various open source licenses have not
been interpreted by PRC courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions
or restrictions on our online and mobile-based channels. If portions of our proprietary software are determined to be subject to an open
source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our
technologies if required so by the license, or otherwise be limited in the licensing of our technologies, each of which could reduce
or eliminate the value of our technologies and loan products. In addition to risks related to license requirements, usage of open source
software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties
or controls on the origin of the software. Many of the risks associated with use of open source software cannot be eliminated, and could
adversely affect our business.
 
From
time to time, we may evaluate and potentially consummate strategic investments or acquisitions, which could require significant management
attention, disrupt our business and adversely affect our financial results.
 
Although
we do not currently have any plans to consummate any acquisitions, we may in the future evaluate and consider strategic investments,
combinations, acquisitions or alliances to further increase the value of our services and better serve our customers. These transactions
could be material to our financial condition and results of operations if consummated. If we are able to identify an appropriate business
opportunity, we may not be able to successfully consummate the transaction and, even if we do consummate such a transaction, we may be
unable to obtain the benefits or avoid the difficulties and risks of such transaction.
 
Strategic
investments or acquisitions will involve risks commonly encountered in business relationships, including:
 

●difficulties
in assimilating and integrating the operations, personnel, systems, data, technologies, products and services of the acquired business;

 

●inability
of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits;

 

●difficulties
in retaining, training, motivating and integrating key personnel;

 

●diversion
of management’s time and resources from our normal daily operations;

 


65
 

 

●difficulties
in successfully incorporating licensed or acquired technology and rights into our business;

 

●difficulties
in maintaining uniform standards, controls, procedures and policies within the combined organizations;

 

●difficulties
in retaining relationships with customers, employees and suppliers of the acquired business;

 

●risks
of entering markets in which we have limited or no prior experience;

 

●regulatory
risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals,
as well as being subject to new regulators with oversight over an acquired business;

 

●assumption
of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights
or increase our risk for liability;

 

●failure
to successfully further develop the acquired technology;

 

●liability
for activities of the acquired business before the acquisition, including intellectual property infringement claims, violations of laws,
commercial disputes, tax liabilities and other known and unknown liabilities;

 

●potential
disruptions to our ongoing businesses; and

 

●unexpected
costs and unknown risks and liabilities associated with strategic investments or acquisitions.

 
We
may not make any investments or acquisitions, or any future investments or acquisitions may not be successful, may not benefit our business
strategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in the intended
benefits. In addition, we cannot assure you that any future investment in or acquisition of new businesses or technology will lead to
the successful development of new or enhanced loan products and services or that any new or enhanced loan products and services, if developed,
will achieve market acceptance or prove to be profitable.
 
Our
business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to
continue in their present positions, our business may be severely disrupted.
 
Our
business operations depend on the continued services of our senior management, particularly the executive officers named in this Report.
While we have provided different incentives to our management, we cannot assure you that we can continue to retain their services. If
one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to replace them
easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition and results
of operations may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain qualified personnel.
In addition, although we have entered into confidentiality and non-competition agreements with our management, there is no assurance
that any member of our management team will not join our competitors or form a competing business. If any dispute arises between our
current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or
we may be unable to enforce them at all.
 
Competition
for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.
 
We
believe our success depends on the efforts and talent of our employees, including risk management, driver and automobile management,
post-financing management, financial and marketing personnel. Our future success depends on our continued ability to attract, develop,
motivate and retain qualified and skilled employees. Competition for highly skilled technical, risk management and financial personnel
is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation
and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may
be able to offer more attractive terms of employment.
 
In
addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek
to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and
the quality of our services and our ability to serve borrowers and investors could diminish, resulting in a material adverse effect to
our business.
 


66
 

 
Increases
in labor costs in the PRC may adversely affect our business and results of operations.
 
The
economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected
to continue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including
pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated
government agencies for the benefit of our employees. The relevant government agencies may examine whether an employer has made adequate
payments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees,
fines and/or other penalties. We expect that our labor costs, including wages and employee benefits, shall continue to increase, without
regarding to the influence of resignation. Furthermore, if the drivers on our platform believe that their earnings on our platform are
not competitive with wages that they can earn elsewhere, either with competitors or in other lines of work, we may have to increase their
earnings to ensure an adequate supply of drivers on our platform, and we may be unable to pass that cost on to riders. In addition, if
drivers on our platform are reclassified as employees instead of independent contractors, our labor costs will be substantially increased,
which could adversely affect our business and results of operations. See also “Risks Factors—Risks Relating to Our Business—Our
business would be adversely affected if drivers were classified as employees, workers or quasi-employees”.
 
Pursuant
to the Labor Contract Law and its implementation rules, employers are subject to stricter requirements in terms of signing labor contracts,
minimum wages, paying remuneration and statutory benefits, determining the term of employee’s probation and unilaterally terminating
labor contracts. In addition, enterprises are forbidden to force laborers to work beyond the time limit and employers shall pay laborers
for overtime work in accordance with the laws and regulations. In the event that we decide to terminate some of our employees or otherwise
change our employment or labor practices, the Labor Contract Law and its implementation rules may limit our ability to effect those changes
in a desirable or cost-effective manner, which could adversely affect our business and results of operations.
 
To date, inflation in China
has not materially impacted our results of operations. According to the National Bureau of Statistics of China, the year-over-year percent
changes in the consumer price index for December 2021, 2022 and 2023 were increases of 0.9%, 2.0% and 0.2%, respectively. Although we
have not been materially affected by inflation in the past, we may be affected by higher rates of inflation in China in the future, particularly
if it affects labor costs. Unless we are able to control our labor costs or pass on these increased labor costs to our customers by increasing
the fees of our services, our financial condition and results of operations may be adversely affected.
 
Furthermore,
on July 16, 2021, the Ministry of Human Resources and Social Security, the NDRC, the Ministry of Transport, together with several other
governmental authorities jointly promulgated Guiding Opinions on Safeguarding the Rights and Interests of Labors in New Forms of Employment,
which require, among others, platform enterprises adopting labor outsourcing and other cooperative labor methods to undertake corresponding
responsibilities in accordance with laws and regulations when labors’ rights and interests are damaged, call for organizing and
launching pilot programs for occupational injury protection of flexible employment personnel, focusing on platform enterprises in industries
such as mobility, takeout, instant delivery and intra-city freight, and encourage platform enterprises to improve the protection for
flexible employment personnel on the platform by purchasing personal accident, employer liability and other commercial insurances. On
November 17, 2021, the Ministry of Transport, the NDRC, the CAC and certain other governmental authorities jointly promulgated the Opinions
on Strengthening the Protection of the Rights and Interests of Labors in New Forms of Transportation Industry, which provide that the
relevant departments shall urge online ride hailing platform enterprises to announce pricing rules and income distribution rules to relevant
parties such as drivers and passengers. The total amount paid by the passengers and the remuneration of the driver, and the ratio of
the difference between the aforementioned amounts to the total amount paid by the passengers shall be displayed to the drivers. In addition,
these opinions aim to strengthen the occupational injury protection of online ride hailing drivers, encourage online ride hailing platform
to actively participate in the occupational injury protection pilot, and urge online ride hailing platform to pay social insurance for
drivers who meet the labor relationship conditions in accordance with the law, and guide and support drivers who do not fully meet the
conditions for establishing labor relations with online ride hailing platform enterprises to participate in corresponding social insurance.
These opinions also emphasize to safeguard the rights of the drivers to have reasonable remuneration and rest, among others.
 
As
the interpretation and implementation of labor-related laws and regulations are still evolving, we cannot assure you that our employment
practices do not and will not violate labor-related laws and regulations in China, which may subject us to labor disputes or government
investigations. We cannot assure you that we have complied or will be able to comply with all labor-related law and regulations. If we
are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our employees
and our business, financial condition and results of operations will be adversely affected.
 


67
 

 
If
we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.
 
We
believe that a critical component of our success is our corporate culture, which we believe fosters innovation, encourages teamwork and
cultivates creativity. As we develop the infrastructure of a public company and continue to grow, we may find it difficult to maintain
these valuable aspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including
our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.
 
Raising
additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our
technologies.
 
We
may seek additional capital through a combination of public and private equity offerings, debt financings, collaborations and licensing
arrangements. To the extent that we raise additional capital through the sale of equity or debt securities, your ownership interest will
be diluted and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence
of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our
ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions
that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances
and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or grant licenses on terms
unfavorable to us.
 
We
will incur increased costs as a result of operating as a smaller reporting public company after we no longer qualify to be an emerging
growth company, and our management will be required to devote substantial time to new compliance initiatives.
 
A
smaller reporting company is defined as a company that has a public float of less than $75 million in common equity as of the last business
day of its most recently completed second fiscal quarter, or if a public float of zero, has less than $50 million in annual revenues
as of its most recently completed fiscal year-end. As a smaller reporting public company, and particularly after we were no longer an
emerging growth company since April 1, 2023, we will incur significant legal, accounting and other expenses that we did not incur as
a private company. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and Nasdaq have imposed various
requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate
governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives.
Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time
consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to
obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members
of our board of directors.
 
Pursuant
to Section 404, we were not required to furnish a report by our management on our internal control over financial reporting, including
an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However,
since we are a smaller reporting company, we are not required to include an attestation report on internal control over financial reporting
issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we
will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging.
In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed
work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes
as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement
process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered
public accounting firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is
effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in
the reliability of our financial statements.
 
If
securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market
price for our common stock and trading volume could decline.
 
The
trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about
us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who
cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the market price for our common
stock would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly,
we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our common stock
to decline.
 


68
 

 
 Item 1B. Unresolved Staff Comments
 
Not
Applicable.
 
 Item 1C. Cybersecurity
 
Risks
from Cybersecurity Threats
 
The
Company faces risks associated with cybersecurity threats in carrying out its business operations. For more details regarding the risks
related to PRC’s cybersecurity regulation, see “Item 1A. Risk Factors—Compliance with China’s new Data Security
Law, Measures on Cybersecurity Review, Personal Information Protection Law, regulations and guidelines relating to the multi-level protection
scheme and any other future laws and regulations may entail significant expenses and could materially affect our business.”;
and “Item 1A. Risk Factors—Recent greater oversight by the CAC over data security, particularly for companies seeking to
list on a foreign exchange, could adversely impact our business and our offering.”
 
For
the year ended March 31, 2024, the Company was not subject to material fines or penalties in connection with cybersecurity, and there
were no material cybersecurity incidents arising from cybersecurity or personal data protection.
 
Governance
 
Our
board of directors does not have a standing risk management committee, but rather administers this oversight function directly through
our board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent
in their respective areas of oversight. While our board of directors has a fiduciary duty to monitor and assess strategic risk exposure,
our audit committee is responsible for overseeing our major financial risk exposures and the steps our management has taken to monitor
and control these exposures, overseeing cybersecurity risks and assisting the board of directors in its oversight over enterprise risk
management. The audit committee also approves or disapproves any related person transactions. Our nominating and corporate governance
committee monitors the effectiveness of our corporate governance guidelines and manages risks associated with the independence of the
board of directors. Our compensation and leadership development committee assesses and monitors whether any of our compensation policies
and programs has the potential to encourage excessive risk-taking.
 
Engagement
of Third-Party Service Providers
 
We
have in place certain infrastructure, systems, policies, and procedures that are designed to proactively and reactively address circumstances
that arise when unexpected events such as a cybersecurity incident occur. These include processes for assessing, identifying, and managing
material risks from cybersecurity threats. Identifying, assessing, and managing cybersecurity risk is integrated into our overall risk
management systems and processes, and we have in place cybersecurity and data privacy training and policies designed to (a) respond to
new requirements in privacy laws and (b) prevent, detect, respond to, mitigate and recover from identified and significant cybersecurity
threats.
 
We have relied on the third-party security assessment procedures and
data outflow control procedures to manage risks from cybersecurity threats associated with our use of third-party service providers. For
example, the servers of the system of XXTX are housed at third-party data centers, and its operations depend on the service providers’
ability to protect such systems in their facilities as well as their own systems. The qualified third-party performs security assessment
by timely assessing their cybersecurity policies, data encryption and privacy policies and relevant certificates, establishing procedures
in granting such third parties access to our database and requiring them to conduct regular inspections. Since in cooperation with third-party
service providers may involve data outbound, we desensitize sensitive information before transferring such data.
 


69
 

 
Our
Chinese subsidiaries and affiliates have incurred, and will continue to incur, significant expenses in an effort to comply with cybersecurity
and information security standards and protocols imposed by law, regulation, industry standards or contractual obligations to the date
of this Report in all material respects.
 
 Item 2. Properties
 
We currently maintain our
principal executive office at 16F, Shihao Square, Middle Jiannan Blvd., High-Tech Zone, Chengdu, Sichuan, People’s Republic of China
610000, comprising an aggregate of 143 square meters under a lease agreement that expires on June 30, 2024. The cost for the office is
approximately $1,520 per month in aggregate. The Company previously entered into two office lease agreements in the same building,
comprising an aggregate of 965 square meters with a monthly rental cost of approximately $10,700. The leasing term was from April 1, 2023
to March 31, 2026 while such lease was terminated in December 2023.
 
We maintain another office
for our Automobile Transaction and Related Services and Online Ride-hailing Platform Services in the city of Changsha, China, comprising
an aggregate of 650 square meters. We lease the office for a monthly rent of approximately $3,700 under a lease agreement that expires
in May 2025.
 
We
also lease a parking lot for automobiles and an exhibition hall in Changsha, with total areas of 2,500 square meters. The monthly rent
for the parking lot and the exhibition hall is approximately $1,400 and approximately $1,800, respectively.
 
We
consider our current facilities adequate for our current operations.
 
 Item 3. Legal Proceedings
 
We
are not currently a party to any material legal or administrative proceedings. We may from time to time be subject to legal or administrative
claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless
of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention.
Please see “Risk Factors.”
 
 Item 4. Mine Safety Disclosures
 
Not
applicable.
 


70
 

 
PART II
 
 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
 
Market
Information
 
Our
common stock trades on the Nasdaq Capital Market under the symbol “AIHS.”
 
Holders
 
Based upon information furnished
by our transfer agent, as of June 24, 2024, the Company had approximately 32 stockholders of record. Because some of our common stock
is held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented
by these record holders.

 
Dividends
 
We have never declared or
paid cash dividends on our shares. Nor do we have any present plan to pay any cash dividends on our common stock in the foreseeable future.
We currently intend to retain most, if not all, of our available funds and any future earnings to operate and grow our business.
 
Our board of directors has
the discretion to declare and pay dividends in the future as we are a holding company and we rely on dividends and other distributions
on equity paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other
cash distributions to our stockholders and service any debt we may incur. The Foreign Investment Law, and the Company Law of the PRC (2006),
as amended, contain the principal regulations governing dividend distributions by wholly foreign owned enterprises. Under these regulations,
wholly foreign owned enterprises may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting
standards and regulations. Additionally, such companies are required to set aside 10% of their after-tax profits of the year, if any,
to statutory reserve funds until such time as the accumulated reserve funds reach and remain above 50% of the registered capital amount.
These reserves are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes.
A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from
prior fiscal years may be distributed together with distributable profits from the current fiscal year. As of March 31, 2024, the total
respective registered capital of all the Company’s direct subsidiaries was approximately RMB513 million (approximately $71.1 million).
And as of March 31, 2024, most of the Company’s subsidiaries incorporated in the PRC have suffered accumulated loss and the Company
concluded none of subsidiaries has ability to transfer a portion of their net assets to the Company either in the form of dividends, loans
or advances.
 
Furthermore,
if our subsidiaries and affiliates in China incur debt on their own in the future, the instruments governing the debt may restrict its
ability to pay dividends or make other payments. If we or our subsidiary and affiliates are unable to receive all of the revenues from
our operations through the current contractual arrangements, we may be unable to pay dividends on our common stock.
 
Equity
Compensation Plan Information
 In September 2018, our board
of directors adopted and in November 2018, our stockholders approved, the 2018 Equity Incentive Plan, pursuant to which a maximum of 200,000
(2,000,000 pre-reverse stock split) shares of common stock were reserved for issuance to our employees, officers, directors, consultants.
The plan permits the grant of nonqualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”),
stock appreciation rights, stock bonus awards, and performance compensation awards. In March 2023 and April 2024, our annual meetings
of stockholders for the years ended March 31, 2022 and 2023 further approved the amendments to the 2018 Equity Incentive Plan, to increase
the number of shares of common stock reserved under the Plan to 1,500,000 shares and 1,800,000 shares, respectively. As of the date of
this Report, the Company has granted an aggregate of 30,379 RSUs (after reverse
split), among which, 26,447 RSUs were issued, 3,182 RSUs were vested but have not been
issued while 750 RSUs were forfeited due to two directors ceased to serve on the board of the Company since November 8,
2018.

 


71
 

 
The
following table provides information as of March 31, 2024 with respect to the shares of our common stock that may be issued under our
existing equity incentive plan:
 


Plan category 
Number of securities to be issued upon exercise of outstanding options, warrants and rights  
Weighted-average exercise price of outstanding options, warrants and rights  
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 

2018 Equity Incentive Plan 
 —  
 —  
 1,770,371 

 
Purchases
of Our Equity Securities
 
None.
 
Recent
Sales of Unregistered Securities
 
None.
 
Use
of Proceeds
 
Not
applicable.
 
 Item 6. [Reserved]
 
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
The following discussion
and analysis of our results of operations and financial condition should be read together with our consolidated financial statements and
the notes thereto and other financial information, which are included elsewhere in this Report. Our financial statements have been prepared
in accordance with U.S. GAAP. In addition, our financial statements and the financial information included in this Report reflect our
organizational transactions and have been prepared as if our current corporate structure had been in place throughout the relevant periods.
 
Overview
 
We are a provider of automobile
transaction and related services, connecting auto dealers and consumers, who are mostly existing and prospective ride-hailing drivers
affiliated with different operators of online ride-hailing platforms in the People’s Republic of China (“PRC” or “China”).
We provide automobile transaction and related services through our wholly owned subsidiary, Chengdu Corenel Technology Limited, a PRC
limited liability company (“Corenel”), and our majority owned subsidiaries, Chengdu Jiekai Technology Ltd. (“Jiekai”),
and Hunan Ruixi Financial Leasing Co., Ltd. (“Hunan Ruixi”), a PRC limited liability company. Since October 2020, we also
operate an online ride-hailing platform through Hunan Xixingtianxia Technology Co., Ltd. (“XXTX”), a wholly-owned subsidiary
of Sichuan Senmiao Zecheng Business Consulting Co., Ltd., our wholly-owned subsidiary (“Senmiao Consulting”). Our platform
enables qualified ride-hailing drivers to provide application-based transportation services mainly in Chengdu, Changsha and other 20 cities
in China. Substantially all of our operations are conducted in China.
 

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Our Automobile Transactions and Related Services
 
Our Automobile Transaction
and Related Services are mainly comprised of (i) automobile operating lease where we provide car rental services to individual customers
to meet their personal needs with lease term no more than twelve months (the “Auto Operating Leasing”); (ii) monthly services
where we provide management and related services to Partner Platforms and other companies
and earn commission from them (the “Auto Commissions”); (iii) automobile financing
where we provide our customers with auto finance solutions through financing leases (the “Auto Financing”); (iv) service fees
from new energy vehicles (“NEVs”) leasing, automobile purchase services where we charge NEVs lessees or automobile purchasers
for a series of the services provided to them throughout the leasing or purchase process based on the chosen product solutions, such as
ride-hailing driver training, assisting with a series of administrative procedures and other consulting services (the “NEVs and
Purchase Services”); (v) auto management and guarantee services provided to online ride-hailing drivers after the delivery of automobiles
(the “Auto Management and Guarantee Services”); (vi) automobile sales where we sell new purchased or used cars to our customers
(the “Auto Sales”); and (vii) other supporting services provided to online ride-hailing drivers. We started our facilitation
and supporting services in November 2018, the sale of automobiles in January 2019, and financial and operating leasing in March 2019,
respectively.
 
Since November 22,
2018, the acquisition date of Hunan Ruixi, and as of March 31, 2024, we have facilitated financing for an aggregate of 312
automobiles with a total value of approximately $5.3 million, sold an aggregate of 1,516 automobiles with a total value of
approximately $14.5 million and delivered 1,892 automobiles under operating leases and 164 automobiles under financing leases to
customers, the vast majority of whom are online ride-hailing drivers.
 
The table below provides
a breakdown of the number of vehicles sold or delivered under different leasing arrangements or managed/guaranteed by us and corresponding
revenue generated for the years ended March 31, 2024 and 2023:
 


  
For the Years Ended 

  
March 31， 

  
2024  
2023 

  
Number of  
   
Number of  
  

  
Vehicles  
Revenue*  
Vehicles  
Revenue* 

Auto Operating Leasing 
 1,492  
$3,831,000  
 1,802  
$3,453,000 

Auto Commissions 
 —  
$196,000  
 —  
$179,000 

Auto Financing 
 164  
$58,000  
 144  
$42,000 

Auto Sales 
 2  
$9,000  
 43  
$243,000 

Other Services 
 >860  
$226,000  
 >1,000  
$456,000 

 
During the year ended March
31, 2024, our Auto Operating Leasing, Auto Commissions, Auto Financing, Auto Sales and other services income accounted for approximately
88.7%, 4.5%, 1.3%, 0.2% and 5.3% of our total revenue from our automobile transactions and related services, respectively, while our Auto
Operating Leasing, Auto Commissions, Auto Financing, Auto Sales, and other services income accounted for approximately 79.0%, 4.1%, 1.0%,
5.6% and 10.3% for the year ended March 31, 2023, respectively.
 
Our Ride-Hailing Platform Services
 
As part of our goal to provide
an all-round solution for online ride-hailing drivers as well as to increase our competitive power in an increasingly competitive online
ride-hailing industry and to take advantage of the market potential, in October 2020, we began operating our own online ride-hailing platform
in Chengdu. The platform (called Xixingtianxia) was owned and operated by XXTX, of which Senmiao Consulting acquired the 100% equity interest
pursuant to a series of investment and supplementary agreements. As of the filing date of this Report, Senmiao Consulting has made accumulated
capital contribution of RMB40.41 million (approximately $5.60 million) to XXTX and the remaining amount is expected to be paid before
December 31, 2025.
 


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XXTX operates Xixingtianxia
and holds a national online reservation taxi operating license. The platform is presently servicing online ride-hailing drivers in 22
cities in China, including Chengdu, Changsha and so on, providing them with a platform to view and take customer orders for rides. We
currently collaborate with Gaode Map, a well-known aggregation platform in China on our ride-hailing platform services. Under our collaboration,
when a rider uses the platform to search for taxi/ride-hailing services on the aggregation platform, the platform provides such rider
a number of online ride-hailing platforms for selection, including ours and if our platform is selected by the rider, the order will then
be distributed to registered drivers on our platform for viewing and acceptance. The rider may also simultaneously select multiple online
ride-hailing platforms in which case, the aggregation platform will distribute the requests to different online ride-hailing platforms
which they cooperate with, based on the number of available drivers using the platform in a certain area and these drivers’ historical
performance, among other things. XXTX generates revenue from providing services to online ride-hailing drivers to assist them in providing
transportation services to the riders looking for taxi/ride-hailing services. XXTX earns commissions for each completed order as the difference
between an upfront quoted fare and the amount earned by a driver based on actual time and distance for the ride charged to the rider.
XXTX settles its commissions with the aggregation platforms on a weekly basis.
 
Meanwhile, in order to strengthen
our market position in certain cities, during the year ended March 31, 2024, our subsidiaries, Hunan Ruixi and Jiekai, cooperated with
other online ride-hailing platforms (“Partner Platforms”), such as Hunan DiDi Technology Co., Ltd., Chengdu Anma Zhixing Technology
Co., Ltd., Sichuan Peitu Kuaixing Technology Co., Ltd. and Chongqing Yiqizhao
Technology Co., Ltd. Chengdu Branch, whereby the online ride-hailing requests and orders shall be completed on Partner Platforms utilizing
the network of cars and drivers of us while Hunan Ruixi and Jiekai earned rental income from drivers and earned commissions from Partner
Platforms.
 
Since December 2023, in order
to improve the efficiency of XXTX’s daily operation and profitability, XXTX has engaged Anhui Lianma Technology Co., Ltd. (“Anhui
Lianma”), a third-party to co-operate the online ride-hailing platform by outsourcing certain daily operation work to Anhui Lianma
in most of cities it operates platform in XXTX and Anhui Lianma will jointly share the operational profits, with the specific calculation
method being defined in the cooperation agreement.
 
During the year ended March
31, 2024, approximately 4.9 million rides with gross fare of approximately $15.1 million were completed through Xixingtianxia and an average
of approximately 5,000 ride-hailing drivers completed rides and earned income through Xixingtianxia (the “Active Drivers”)
each month. During the year ended March 31, 2024, we earned online ride-hailing platform service fees of approximately $2.5 million, after
netting off approximately $0.3 million incentives paid to Active Drivers.
 
During the year ended March
31, 2023, approximately 6.1 million rides with gross fare of approximately $19.9 million were completed through Xixingtianxia and an average
of over 5,100 Active Drivers each month. During the year ended March 31, 2023, we earned online ride-hailing platform service fees of
approximately $3.7 million, netting off approximately $0.5 million incentives paid to Active Drivers.
 
We plan to maintain our driver
base for the platform and automobile rental business while strengthening the royalty of the drivers who both lease our cars and use our
platform while expanding, but our platform is available to others.
 
Key Factors and Risks Affecting Results of Operations
 
Ability to Increase Our Automobile Lessee and Active Driver Base
 Our revenue growth has been
largely driven by the expansion of our automobile lessee base and the corresponding revenue generated from operating and financial leasing,
as well as the number of completed online ride-hailing orders on our platform, which largely depends on the number of Active Drivers who
complete ride-hailing transactions on our platform. We acquire customers for our Automobile Transaction and Related Services, as well
as for our Online Ride-hailing Platform Services, through the network of third-party sales teams, referral from online ride-hailing platforms
and our own efforts including online advertising and billboard advertising. We also send out fliers and participate in trade shows to
advertise our services. We plan to maintain the number of our Active Drivers by marketing our platform to our existing and prospective
automobile lessees in the cities we now operate in. We expect the expansion of our Active Driver base to promote the growth of our automobile
rental business because we offer automobile rental solutions/incentives specifically targeted at drivers using our platform and the Partner
Platforms. An effective cross-selling strategies between our automobile leasing business and Online Ride-hailing Platform Services business
is important to our expansion and revenue growth. We also plan to strengthen our marketing efforts through the collaboration with certain
automobile dealers and through our own team by employing more experienced staff, sharing market resources with our equity investee company,
and improving the quality and variety of our services. As of March 31, 2024, we had 5 employees in our own sales department.

 


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Management of Automobile Rentals
 
Due to the fierce competition
of online ride-hailing industry in those cities we operate in, we have witnessed a high turn-over rate on the short-term car rentals during
the year ended March 31, 2024. To meet the demand in Chengdu and Changsha, we have purchased and leased automobiles from third parties
for our operating lease. The daily management and timely maintenance of leased automobiles will have a significant effect on the growth
of our income from leasing automobiles in the next twelve months. The effective management of our automobiles through our proprietary
system and experienced auto-management team could provide in-time delivery and qualified automobiles to potential lessees, either for
personal use or providing online ride-hailing services. As of March 31, 2024, for parking and management of automobiles for operating
lease, we had one parking lot, an exhibition hall and 4 employees in Changsha, and we also share the parking lot with our equity investee
company, Jinkailong in Chengdu. During the years ended March 31, 2024 and 2023, the average utilization of the automobiles for operating
lease was approximately 79.7% and 64.9%, respectively.
 
Our Service Offerings and Pricing
 
The growth of our revenue
depends on our ability to improve existing solutions and services provided, continue identifying evolving business needs, refine our collaborations
with business partners and provide value-added services to our customers. The attraction of new automobile leases depends on our leasing
solutions with attractive rental price and flexible leasing terms. We have also adopted a series of pricing formulas to adopt the market
changes, considering the historical and future expenditure, remaining available leasing months and market price to determine our rental
price for varied rental solutions. Furthermore, our product designs affect the type of automobile leases we attract, which in turn affect
our financial performance. The attraction of new Active Drivers depends on the comprehensive income they could earn from our own or cooperated
platform, which is mainly affected by the number of orders distributed to them through our platform and the amount of the incentives paid
to them from platforms. Our revenue growth also depends on our abilities to effectively price our services, which enables us to attract
more customers and improve our profit margin.
 
Ability to Retain Key Business Cooperators
 
Historically, we have set
up a series of strategy and business relationships with certain affiliates of some famous and leading companies of NEVs manufacturers,
online ride-hailing platforms, local NEVs leasing companies, and travel service providers to develop our Automobile Transaction and Related
Services and Online Ride-hailing Platform Services. We earned commission or services fee from them, purchased and leased automobiles for
our business at a favorable price. The close relationships have provided us with the necessary capacity to support the development of
our online ride-hailing platform and leasing business. To retain these valuable cooperators and continuously explore opportunities to
collaborate with them in more areas is important to us to have considerable resources to support the exploration and expansion of our
business into new cities.
 
Ability to Collect Receivables on a Timely Basis
 
For receivables from
Auto Operating Leasing, we usually settle the rental income with each online ride-hailing driver monthly based on the product
solutions they chose. In accordance with the development of the operating lease business, our Partner Platforms, such as Gaode,
agree to temporarily “lock-up” the fares of the rides which Active Drivers earn from the platform to ensure the timely
collection of its rental receivables from those Active Drivers. As of March 31, 2024, we had accounts receivable of operating lease
of approximately $19,000 in total. Besides, during the year ended March 31, 2024, we settled our commissions with the Partner
Platforms for our online ride-hailing platform services and automobile rental income on a monthly basis. As of March 31, 2024, we
had accounts receivable of online ride-hailing service fees of approximately $14,000 in total. We used to advance the purchase price
of automobiles and all service expenses when we provide related services to the purchasers. We collect the receivables due from
automobile purchasers from their monthly installment payments during the relevant affiliation periods. As of March 31, 2024, we had
accounts receivable of approximately $3,000 and advanced payments of approximately $3,000 due from the historical automobile
purchasers.
 
The efficiency of collection
of the monthly and weekly payments has a material impact on our daily operation. Our risk and asset management department has set up a
series of procedures to monitor the collection from drivers. Our business department has also set up a stable and close relationship with
cooperated platform to ensure the timely collection of commissions. The accounts receivable and advance payments may increase our liquidity
risk. We have used the majority of the proceeds from our equity offerings and plan to seek equity and/or debt financings to pay for the
expenditure related to the automobile purchase. To pay for the expenditure in advance will enhance the stability of our daily operation
and lower the liquidity risk, and attract more customers.
 


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Ability to Manage Defaults and Potential Guarantee Liability Effectively
 
We manage the credit risk
arising from the default of automobile purchasers and lessees by performing credit checks on each automobile purchaser or lessee based
on the credit reports from People’s Bank of China and third-party credit rating companies, and personal information including residence,
ethnicity group, driving history and involvement in legal proceeding. Our risk department continuously monitors the payment by each purchaser
and sends them payment reminders. We also keep monitoring the daily gross fare earned by the online ride-hailing drivers, who are our
majority customers and run their business through our online ride-hailing platform during the year ended March 31, 2024. We do this so
that we can evaluate their financial conditions and provide them with assistance including the transfer of automobile to a new driver
if they are no longer interested in providing ride-hailing services or are unable to earn enough income to make monthly lease/loan payments.
 
In addition, certain
automobiles are used as collateral to secure purchasers’ payment obligations under the financing arrangements in prior years.
As of March 31, 2024, Hunan Ruixi did not have any guarantee liabilities due to financial institutions while accumulated 108 online
ride-hailing drivers we serviced rendered their automobiles to Hunan Ruixi for sublease or sale. In general, most of the defaulted
automobile purchasers who want to remain in online ride-hailing business would pay the default amounts within one to three months.
Our risk management department typically starts to interact with overdue purchasers if they have missed one monthly installment
payment. However, if the balances are overdue for more than two months or the purchasers decide to exit the online ride-hailing
business and sublease or sell their automobiles, we would fully record allowance for credit losses against receivables from those
purchasers. For the years ended March 31, 2024 and 2023, we recognized provision for credit losses of $4,209 and $0, respectively,
against receivables from these purchasers served by Hunan Ruixi. For the years ended March 31, 2024 and 2023, we recognized
approximately $500 and $7,300, respectively, expenses for the guarantee services as the drivers exited the online ride-hailing
business and would no longer make the monthly repayments to us. During the years ended March 31, 2024 and 2023, 19 and 86 rendered
automobiles have been sold, 7 and 49 rendered automobiles have been sub-leased to other customers, respectively. By selling and
subleasing automobiles, we believe we can cope with the defaults and control associated risks.
 
Further, the automobiles
subject to our financing leases are not collateralized by us. As of March 31, 2024, the total value of non-collateralized automobiles
was approximately $255,000. We believe our risk exposure of financing leasing is immaterial as we have experienced limited default cases
and we are able to re-lease those automobiles to drivers under financing leases.
 
Actual Impact of Coronavirus (COVID-19) in China on Our Business
 
Our Automobile Transactions
and Related Services have been gradually recovering from the adverse impact of COVID-19 pandemic. As of March 31, 2024, 108 online ride-hailing
drivers we serviced rendered their automobiles to Hunan Ruixi. As most of the leasing term of the automobiles we delivered in Changsha
in prior periods has come to the end, during the year ended March 31, 2024, the number of newly rendered automobiles decreased to 0 as
compared with 7 during the year ended March 31, 2023. On the other hand, the number of the completed orders through our online ride-hailing
platform had significant decrease in December 2022 due to the infection peak after China lifted the prevention and control of COVID-19.
 
Our cash flow had been adversely
impacted by local resurgences of COVID-19 in Chengdu, Changsha and Guangzhou while the COVID-19 measures in China kept applying the current
control and prevention measures especially from September to November 2022, which had negative impact on the online ride-hailing market
accordingly due to travel restriction.
 
Any of these factors related
to COVID-19 and other similar or currently unforeseen factors beyond our control could have an adverse effect on our overall business
environment, causing uncertainties in the regions in China where we conduct business, and causing our business to suffer in ways that
we cannot predict and materially and adversely impact our business, financial condition and results of operations.
 
Ability to Manage and Maintain Ride-Hailing Business
 
Due to the fierce competition
of online ride-hailing industry in Chengdu and Changsha, our ability to increase our revenue over time may be limited if we focus only
on our current Automobile Transaction and Related Services business model. As part of our strategy to provide an all-encompassing solution
for online ride-hailing drivers, we have expanded our services to drivers through the operation of Xixingtianxia, our own online ride-hailing
platform. We generate revenue from commissions earned from each completed order, which represent the difference between an upfront quoted
fare and the amount earned by a driver based on actual time and distance for the ride charged to the rider. As the aggregation platforms
distribute the demand orders to different online ride-hailing platforms, the flow of drivers in our area of operations is enhanced, leading
to a higher probability that more ride orders will be distributed to our platform, which in turn will increase the revenue of the drivers
who use our platform (and our revenue). This also allows us to attract more drivers to engage their online ride-hailing business on our
platform. Through a series of promotion and effective daily management and training services, we expect our own online ride-hailing platform
will offer us a stable revenue source which can also help grow our automobile financing and leasing business. Besides, we are dealing
with other trip platforms to attract more riders choosing their trip through our platform.
 


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Pursuant to the cooperation
agreement signed with Didi Chuxing Technology Co., Ltd. (“Didi”) for our Automobile Transaction and Related Services, we may
be penalized by Didi, or our partnership with Didi may be terminated as we now operate a business competitive with Didi. However, the
service fees we earned from Didi for automobile transaction and related services currently represent less than 0.1% of our total revenue.
Therefore, we believe that the risk of termination of cooperation with Didi on automobile transaction and related services will not have
a material influence on our business or results of operations.
 
If we could not maintain
the scale of the online ride-hailing drivers who use our platform which may cause we could not generate sufficient revenue and we may
have a larger cash outflow in our daily operations in the next twelve months. Our cash flow situation may worsen if the economy in China
does not improve as expected.
 
Ability to Compete Effectively
 
Our business and results
of operations depend on our ability to compete effectively. Overall, our competitive position may be affected by, among other things,
our service quality and our ability to price our solutions and services competitively. We will set up and continuously optimize our own
business system to improve our service quality and user experience. Our competitors may have more resources than we do, including financial,
technological, marketing and others and may be able to devote greater resources to the development and promotion of their services. We
will need to continue to introduce new or enhance existing solutions and services to continue to attract automobile dealers, financial
institutions, car buyers, lessees, ride-hailing drivers and other industry participants. Whether and how quickly we can do so will have
a significant impact on the growth of our business.
 
Market Opportunity and Government Regulations in China
 
The demand for our services
depends on overall market conditions of the online ride-hailing industry in China. The continuous growth of the urban population places
increasing pressure on the urban transportation and the improvement of living standards has increased the market demand for quality travel
in China. Traditional taxi service is limited, and the emerging online platforms have created good opportunities for the development of
the online ride-hailing service market. The market value is expected to increase from RMB354.7 billion in 2024 to RMB751.3 billion in
2028, owing to rising consumer demand for economical mobility options and an amplified penetration of shared mobility services, especially
in lower-tier cities. According to the 53th Statistical report on Internet Development in China published in March 2024 by the China Internet
Network Information Center (the “CNNIC”), the number of online ride-hailing service users had reached 528 million by the end
of December 2023, and took approximately 48.3% of the total number of Chinese internet users. In addition, in recent years, aggregation
platforms have gained rising significance in the shared mobility industry. According to Frost & Sullivan, the portion of ride hailing
orders fulfilled through aggregation platforms increased from 3.5% in 2018 to 30.0% in 2023, and is expected to further increase to 49.0%
by 2028. The online ride-hailing industry is also facing increasing competition in China and is attracting more capital investment. For
example, Dida Inc., Chenqi Technology Limited and CaoCao Inc. have filed their prospectuses to the Stock Exchange of Hong Kong Limited
in March 2024 and April 2024, respectively.
 
However, the participants
in the online ride-hailing industry are facing the increasingly fierce competitions. According to the Ministry of Transportation (the
“MOT”) of the People’s Republic of China, as of April 30, 2024, approximately 349 online ride-hailing platforms have
obtained booking taxi operating licenses and the total volume of online ride-hailing orders was approximately 897 million in April 2024
in China. Meanwhile, approximately 2.93 million online booking taxi transportation certificates and approximately 6.96 million online
booking taxi driver’s licenses were issued nationwide in China. Since 2023, the municipal transportation bureaus in a series of
cities in China have released operational dynamics and risk warnings for the online ride-hailing industry, stating that the online ride-hailing
market has become saturated. They remind enterprises and practitioners who intend to engage in online ride-hailing services should have
a detailed understanding of relevant regulations, conduct market research, fully consider changes in operating income due to factors such
as supply and demand, market conditions, fluctuations or continuous declines, objectively evaluate the actual income level of industry
practitioners, and make rational and prudent career choices.
 
The online ride-hailing industry
may also be affected by, among other factors, the general economic conditions in China. The interest rates and unemployment rates may
affect the demand of ride-hailing services and automobile purchasers’ willingness to seek credit from financial institutions. Adverse
economic conditions could also reduce the average income of individual and intensify the competition between platforms. The platforms
may spend more incentives and increase promotion activities to attract more riders and maintain sufficient online ride-hailing drivers
to provide transportation services to riders. Should any of those negative situations occur, the volume and value of the automobile transactions
we service will decline, and our revenue and financial condition will be negatively impacted.
 


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In order to manage the rapidly
growing ride-hailing service market and control relevant risks, on July 27, 2016, seven ministries and commissions in China, including
the MOT, jointly promulgated the “Interim Measures for the Administration of Online Taxi Booking Business Operations and Services”
(“Interim Measures”) and amended it on December 28, 2019 and November 30, 2022, which legalizes online ride-hailing services
such as XXTX and requires the online ride-hailing services to meet the requirements set out by the measures and obtain taxi-booking service
licenses and take full responsibility of the ride services to ensure the safety of riders.
 
On November 5, 2016, the
Municipal Communications Commission of Chengdu City and a number of municipal departments jointly issued the “Implementation Rules
for the Administration of Online Booking Taxi Management Services for Chengdu”, which was abolished and replaced by the updated
version issued on July 26, 2021. On August 10, 2017, the Transportation Commission of Chengdu further issued the guidelines on compliance
requirements for online ride-hailing businesses, including Working Process for the Online Appointment of Taxi Drivers Qualification Examination
and Issuance and Online Appointment Taxi Transportation Certificate Issuance Process. On November 28, 2016, Guangzhou Municipal People’s
Government promulgated Interim Measures for the Management of Online Ride Hailing Operation and Service in Guangzhou, as amended on November
14, 2019. According to these regulations and guidelines, three licenses /certificates are required for operating the online ride-hailing
business in Chengdu and Guangzhou: (1) the ride-hailing service platform such as XXTX should obtain the online booking taxi operating
license; (2) the automobiles used for online ride-hailing should obtain the online booking taxi transportation certificate (“automobile
certificate”); (3) the drivers should obtain the online booking taxi driver’s license (“driver’s license”).
Besides, all the new cars used for online ride-hailing in Chengdu should be NEVs since July 2021.
 
On July 23, 2018, the General
Office of Changsha Municipal People’s Government issued the “Detailed Rules for the Administration of Online Booking Taxi
Management Services for Changsha.” On June 12, 2019, the Municipal Communications Commission of Changsha City further issued “Transfer
and Registration Procedures of Changsha Online Booking of Taxi.” According to the regulations and guidelines, to operate a ride-hailing
business in Changsha requires similar licenses in Chengdu, except those automobiles used for online ride-hailing services are required
to meet certain standards, including that the sales price (including taxes) is over RMB120,000 (approximately $17,000). In practice, Hunan
Ruixi is also required to employ a safety administrator for every 50 automobiles used for online ride-hailing services and submit daily
operation information of these automobiles such as traffic violation to the Transport Management Office of the Municipal Communications
Commission of Changsha City every month. On November 28, 2016, Guangzhou Municipal People’s Government also promulgated Interim
Measures for the Management of Online Ride Hailing Operation and Service in Guangzhou, as amended on November 14, 2019.
 
In addition to the national
online reservation taxi operating license, XXTX and its subsidiaries also obtained the online reservation taxi operating license 29 cities,
including Chengdu, Changsha, Guangzhou, Tianjin, Shenyang, Harbin, Changchun, Nanchang, Xining, Daoxian, two cities in Shandong, Guangxi
Province and Zhejiang, respectively, three cities in Guizhou Province, seven cities in Jiangsu Province, other two cities in Hunan and
Guangdong Province, respectively, and other five cities in Sichuan Province from June 2020 to October 2023, to operate the online ride-hailing
platform services.
 
However, approximately 25%
of our ride-hailing drivers have not obtained the driver’s license for online ride-hailing services as of March 31, 2024 while all
of the cars used for online ride-hailing services which we provided management services have the automobile certificate. Without requisite
automobile certificate or driver’s license, these drivers may be suspended from providing ride-hailing services, confiscated their
illegal income and subject to fines of up to 10 times of their illegal income. Starting in December 2019, Didi began to enforce such limitation
on drivers in Chengdu who have a driver’s license but operate automobiles without the automobile certificate. Meanwhile, during
the year ended March 31, 2024, Gaode conducted several rounds of compliance checks in Chengdu and other cities. Gaode reduced the number
of orders dispatched to XXTX platform as it found certain drivers who provide their online ride-hailing services through our platform
without obtaining the driver’s licenses during the checking time. Accordingly, we have strengthened the drivers’ qualification
check, and the decrease in the number of drivers without licenses further resulted to the decrease in the number of orders completed through
XXTX platform. Thus, our revenue from online ride-hailing platform services decreased during the year ended March 31, 2024 as compared
with last year.
 
Furthermore, according to
the Interim Measures, no enterprise or individual is allowed to provide information for conducting online ride-hailing services to unqualified
vehicles and drivers. Pursuant to the Interim Measures, XXTX and its subsidiaries may be fined between RMB5,000 to RMB30,000 ($692 to $4,155) for violations of the Interim Measures, including providing online ride-hailing platform services to unqualified drivers
or vehicles. During the year ended March 31, 2024, we have been fined by approximately $76,000 by Traffic Management Bureaus in Chengdu,
Changsha, Guangzhou and Tianjin, of which, approximately $30,000 was further compensated by drivers or cooperated third parties. If we
are deemed in serious violation of the Interim Measures, our Online Ride-hailing Platform Services may be suspended and the relevant licenses
may be revoked by certain government authorities.
 


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We are in the process of
assisting the drivers to obtain the required certificate and license both for our Automobile Transaction and Related Services and our
Online Ride-hailing Platform Services. However, there is no guarantee that all of the drivers who run their online ride-hailing business
through our platform would be able to obtain all the certificates and licenses. Our business and results of operations shall be materially
and adversely affected if our affiliated drivers are suspended from providing ride-hailing services or imposed substantial fines or if
we are found to be in serious violation of the Interim Measures due to the drivers’ failure to obtain requite licenses and/or automobile
certificates in connection with providing services through our platform. For example, from September 2023 to December 2023, Gaode has
performed a series of compliance check aiming at driver’s license in several cities, including Chengdu and Guangzhou, which caused
the decrease in the number of completed orders through our platform and the decrease in our online ride-hailing platform services accordingly.
 
The Chinese government has
exercised and continued to exercise substantial control over virtually every sector of the Chinese economy through regulation and state
ownership. For example, the Chinese cybersecurity regulator announced on July 2, 2021 that it had begun an investigation of Didi and two
days later ordered that the company’s app be removed from smartphone app stores. We believe that our current operations are in compliance
with the laws and regulations of the Chinese cybersecurity regulator. However, the Company’s operations could be adversely affected,
directly or indirectly, by existing or future laws and regulations relating to its business or industry.
 
Results of Operations for the year ended March 31, 2024 Compared
to the year ended March 31, 2023
 


  
For the Years Ended  
  

  
March 31,  
  

  
2024  
2023  
Change 

Revenues 
$6,814,428  
$8,082,514  
$(1,268,086)

Cost of revenues 
 (5,253,857) 
 (6,590,001) 
 1,336,144 

Gross profit 
 1,560,571  
 1,492,513  
 68,058 

Operating expenses 
    
    
   

Selling, general and administrative expenses 
 (4,115,436) 
 (6,142,447) 
 2,027,011 

Provision for credit losses 
 (1,725,746) 
 (1,487,889) 
 (237,857)

Impairments of inventories 
 —  
 (3,085) 
 3,085 

Stock-based compensations 
 (444,300) 
 —  
 (444,300)

Total operating expenses 
 (6,285,482) 
 (7,633,421) 
 1,347,939 

Loss from operations 
 (4,724,911) 
 (6,140,908) 
 1,415,997 

Other income, net 
 315,450  
 664,001  
 (348,551)

Interest expense 
 (17,630) 
 —  
 (17,630)

Interest expense on finance leases 
 (29,088) 
 (25,675) 
 (3,413)

Change in fair value of derivative liabilities 
 212,949  
 1,711,889  
 (1,498,940)

Loss before income taxes 
 (4,243,230) 
 (3,790,693) 
 (452,537)

Income tax benefit 
 9,016  
 —  
 9,016 

Net loss 
$(4,234,214) 
$(3,790,693) 
$(443,521)

 
Revenues
 
We started generating revenue
from Automobile Transaction and Related Services from our acquisition of Hunan Ruixi on November 22, 2018 and revenue from online ride-hailing
platform services from our acquisition of XXTX on October 23, 2020, respectively.
 
Revenue for the year ended
March 31, 2024 decreased by $1,268,086, or approximately 16%, as compared with the year ended March 31, 2023. The decrease was mainly
due to the decrease of revenues from online ride-hailing platform services resulted from the decrease in orders caused by the market competition,
and partly offset by the increase of operating lease revenues from automobile rentals as a result of the expansion and our continuous
“efficiency - improving” strategy of this business.
 
As we have focused on our
automobile rental and Online Ride-hailing Platform Services business, we expect revenue from our online ride-hailing platform services
and automobile rental to continuously account for a majority of our revenues. We plan to provide a series of product solutions to sustain
and further increase the number of our automobiles for operating leases.
 


79
 

 
The following table sets forth the breakdown of
revenues by revenue source for the years ended March 31, 2024 and 2023:
 


  
For the Years Ended 

  
March 31, 

  
2024  
2023 

Revenue from automobile transactions and related services 
$4,320,031  
$4,372,569 

- Operating lease revenues from automobile rentals 
 3,831,037  
 3,453,392 

- Monthly services commissions 
 196,099  
 179,241 

- Financing revenues 
 57,677  
 41,738 

- Service fees from NEVs leasing 
 45,231  
 350,510 

- Service fees from automobile purchase services 
 36,637  
 33,585 

- Service fees from management and guarantee services 
 16,246  
 40,158 

- Revenues from sales of automobiles 
 8,822  
 243,065 

- Other service fees 
 128,282  
 30,880 

  
    
   

Revenue from online ride-hailing platform services 
 2,494,397  
 3,709,945 

  
    
   

Total Revenue 
$6,814,428  
$8,082,514 

 
Revenue from Automobile Transactions and Related Services
 
Revenue from our automobile
transaction and related services mainly includes operating lease revenues from automobile rentals, monthly services commissions, financing
revenues, service fees from NEVs leasing, service fees from automobile purchase services, service fees from automobile management and
guarantee services, sales revenue of automobiles, and other services fees, which accounted for approximately 88.7%, 4.5%, 1.3%, 1.0%,
0.8%, 0.4%, 0.2% and 3.1%, respectively, of the total revenue from automobile transaction and related services during the year ended March
31, 2024. Meanwhile, operating lease revenues from automobile rentals, service fees from NEVs leasing, monthly services commissions, financing
revenues, service fees from automobile purchase services, service fees from automobile management and guarantee services, sales revenue
of automobiles and other services fees, which accounted for approximately 79.0%, 8.0%, 4.1%, 1.0%, 0.8%, 0.9%, 5.6% and 0.6%, respectively,
of the total revenue from automobile transaction and related services during the year ended March 31, 2023.
 
Operating lease revenues from automobile rentals
 
We generate revenues from
leasing our own automobiles, sub-leasing automobiles leased from third-parties or rendered by online ride-hailing drivers with their authorization
for a lease term of no more than twelve months. The increase of rental income of $377,645 or approximately 11% during the year ended March
31, 2024 was mainly due to the increased average utilization of the automobiles for operating lease increased from approximately 64.9%
to 79.7%. We leased over 1,400 automobiles with an average monthly rental income of approximately $485 per automobile, resulting in a
rental income of $3,831,037, including rental income of $34,742 from Jinkailong, for the year ended March 31, 2024. While we leased over
1,800 automobiles with an average monthly rental income of approximately $478 per automobile, resulting in a rental income of $3,453,392,
including rental income of $344,120 from Jinkailong, for the year ended March 31, 2023.
 
Monthly services commissions
 
We generated revenues of
$196,099 and $179,241 from the monthly management and related services provided to our Partner Platforms and other companies during the
years ended March 31, 2024 and 2023, respectively. The increase of $16,858 or approximately 9% was due to that we improved our qualities
of services and we had more Partner Platforms during the year ended March 31, 2024.
 
Financing revenues
 
We started our financial
leasing business in March 2019 and began to generate interest income from providing financial leasing services to ride-hailing drivers
in April 2019. We also charge the customers of our automobile financing facilitation services interest on their monthly payments which
cover purchase price of automobile and our services fees and facilitation fees for terms of 36 or 48 months. We recognized a total interest
income of $57,677 from an average monthly number of 33 automobiles and $41,738 from an average monthly number of 44 automobiles during
the years ended March 31, 2024 and 2023, respectively. The increase was due to the monthly payment we charged to customers for financial
leasing increased during the year ended March 31, 2024.
 
Service fees from NEVs leasing
 
We generated revenues of
$45,231 and $350,510 from leasing NEVs by charging leases service fees during the years ended March 31, 2024 and 2023, respectively. The
amount of services fees for NEVs leasing is based on its product solutions. The decrease of $305,279 or approximately 87% was mainly due
to that we adjusted our product solutions since January 2023, and more customers chose the solutions with no services fees for NEVs leasing.
 


80
 

 
Service fees from automobile purchase services and Service fees
from automobile management and guarantee services
 
We generate revenues from
providing a series of automobile purchase services throughout the automobile purchase transaction process, including sales-type lease.
We had revenue from 22 automobiles purchase transaction during the year ended March 31, 2024 while we had revenue from 15 automobile purchase
services during the year ended March 31, 2023. As a result, the related service fees generated increased $3,052 from the year ended March
31, 2023 to the year ended March 31, 2024.
 
The
majority of our customers are online ride-hailing drivers. Some of them also entered into affiliation service agreements in prior periods
with us pursuant to which we provide them post-transaction management services and guarantee services. The decrease of $23,912 or approximately
60% was due to the decrease in the accumulated number of rendered automobiles which were subsequently rented to ride-hailing drivers whom
we charge rent rather than charging management and guarantee services fee. We had management and guarantee services for over 30 and 110
automobiles during the years ended March 31, 2024 and 2023, respectively.
 
Sales of automobiles 
 
We sold two used-automobiles
with income of $8,822 during the year ended March 31, 2024. Meanwhile, we sold one new and 42 used automobiles with income of $243,065
during the year ended March 31, 2023.
 
Other service fees
 
We generate other revenues
from other miscellaneous service fees charged to our customers. Other services fees increased $97,402, was mainly due to the maintenance
fees of approximately $64,700 charged to our customers pursuant to certain new production solutions adopted during the year ended March
31, 2024.
 
Revenue from online ride-hailing platform services
 
We generate revenue from
providing services to online ride-hailing drivers to assist them in providing transportation service to the riders though our platform
and earn commissions for each completed order equal to the difference between an upfront quoted fare and the amount earned by a driver
based on actual time and distance for the ride charged to the rider since October 2020. During the year ended March 31, 2024, approximately
4.9 million rides with gross fare of approximately $15.1 million were completed through our Xixingtianxia platform and we earned online
ride-hailing platform service fees of $2,494,397, after netting off approximately $0.3 million incentives paid to Active Drivers. The
decrease was mainly due to fewer completed orders as a result of increased competition and compliance checks conducted by our platform
partner Gaode in Chengdu, during the year ended March 31, 2024.
 
During the year ended March
31, 2023, approximately 6.1 million rides with gross fare of approximately $19.9 million were completed through our Xixingtianxia platform
and we earned online ride-hailing platform service fees of $3,709,945, after netting off approximately $0.5 million incentives paid to
Active Drivers.
 
Cost of Revenues
 
Cost of revenues represents
(1) the amortization of ROUs, depreciation and rental cost of automobiles, daily maintenance and insurance expense of automobiles which
related to our Auto Operating Leasing of $3,384,761; (2) technical service charges, insurance and other expenses related to our Online
Ride-Hailing Platform Services of $1,858,557; and (3) costs of our Auto Sales of $10,539. Cost of revenues decreased by $1,336,144 or
approximately 20% during the year ended March 31, 2024 as compared with the same period in 2023, mainly due to the decrease of $591,096
in costs of automobiles under operating leases due to the decrease in the average daily maintenance and insurance expense of the automobiles
for operating lease as we used more NEVs in the year ended March 31, 2024, decrease of $436,676 in direct expense and technical service
fees of online ride-hailing platform services due to the decrease in the number of completed orders, and decrease of $308,372 in costs
of our Auto Sales as the number of automobiles sold decreased from 43 to 2. During the years ended March 31, 2024 and 2023, the costs
of automobiles under operating leases with amount of $472,848 and $509,904, respectively, was from one of our related parties.
 


81
 

 
Gross Profit
 
We had gross profit of $1,559,463
and $1,492,513, respectively, during the years ended March 31, 2024 and 2023. The increase of $68,058 was mainly due to the increase in
gross profit in our operating lease, partially offset by the decrease in profit from online ride-hailing platform services and other services.
The following table sets forth the breakdown of gross profit (loss) by major revenue source for the years ended March 31, 2024 and 2023:
 


  
For the Years Ended 

  
March 31, 

  
2024  
2023 

- Auto Operating Leasing 
$446,276  
$(522,465)

- Other Automobile transaction and related Services 
 480,172  
 676,112 

- Auto Sales 
 (1,717) 
 (75,846)

- Online Ride-Hailing Platform Services 
 635,840  
 1,414,712 

Total Gross Profit 
$1,560,571  
$1,492,513 

 
We had a gross profit of
$446,276 in our automobile operating leasing during the year ended March 31, 2024, which increased by $968,741 from a gross loss of $522,465
in the year ended March 31, 2023. The increase was mainly due to the increase in the average utilization of the automobiles for operating
lease from approximately 64.9% to 79.7% and the decrease in the average daily maintenance and insurance expense of the automobiles for
operating lease as we used more NEVs in the year ended March 31, 2024 as compared with the year ended March 31, 2023. We had a gross profit
of $635,840 in our online ride-hailing platform services during the year ended March 31, 2024, which decreased by $778,872 from a gross
profit of $1,414,712 in the year ended March 31, 2023. The decrease was attributable to the decrease of gross fare of rides completed
through our Xixingtianxia platform from approximately $6.1 million for the year ended March 31, 2023 to approximately $4.9 million for
the year ended March 31, 2024, respectively. The decrease of $195,940 in profit of other services was mainly due to the decrease of services
fees for NEVs leasing pursuant to our adjustment on product solutions.
 
Consequently, the overall gross profit margin increased to approximately
22.9% during the year ended March 31, 2024 from approximately 18.5% during the year ended March 31, 2023. The increase was mainly due
to the operating leasing had a gross profit margin of 11.6% during the year ended March 31, 2024 as compared with a gross loss (approximately
negative 15.1%) in the year ended March 31, 2023. It was partially offset by the decrease in the gross profit margin of online ride-hailing
platform services from approximately 38.1% during the year ended March 31, 2023 to approximately 25.5% during the year ended March 31,
2024.
 
Selling, General and Administrative Expenses
 
Selling, general and administrative
expenses primarily consist of salary and employee benefits, office rental expense, travel expenses, and other costs. Selling, general
and administrative expenses decreased from $6,142,447 for the year ended March 31, 2023 to $4,115,436 for the year ended March 31, 2024,
representing a decrease of $2,027,011, or approximately 33.0%. The decrease was attributable to our continuous control on costs and streamline
expenses during the year ended March 31, 2024. The decrease mainly consists of (1) a decrease of $1,220,672 in salary and employee benefits
as the average monthly number of our employees decreased from 175 to 97; (2) a decrease of $325,088 in rental and offices expenditure
as a result of reducing office rental and insurance charges during the year ended March 31, 2024; (3) a decrease of $125,586 in entertainment,
advertising and promotion as we cut down market promotion expenditure in accordance with the market change in the year ended March 31,
2024; (4) a decrease of $112,619 in amortization of automobiles which were rendered to us but have not been sub-leased as our ROUs have
been fully amortized; (5) a decrease of $98,309 in professional service fees such as financial, legal and market consulting; and (6) a
decrease in liquidated damages compensation of $86,250 for investors in November 2021 Private Placement incurred during the year ended
March 31, 2023 while no similar expenses during the year ended March 31, 2024.
 
Provision for credit losses
 
For the year ended March
31, 2024, we re-evaluated the possibility of collection of unsettled balances from customers/suppliers of our automobile transactions
and related services, and provided provision for credit losses of $1,703,563 against receivables from Jinkailong, $17,974 against the
security deposit not returned for over one year after the end of the cooperation, and $1,557 and $2,652 against receivable and other receivable
for unsettled balances from a historical customer, respectively. While we provided provision for credit losses of $1,484,495 and $3,394,
respectively, against receivables from Jinkailong and a customer we serviced who purchased our automobiles from Yicheng, during the year
ended March 31, 2023.
 
Impairments of inventories
 
For the years ended March
31, 2024 and 2023, we evaluated the net realizable value of our inventories and recognized an impairment loss of $0 and $3,085, respectively,
for certain automobiles for sale based on their selling price in the market.
 


82
 

 
Stock-based compensation
 
In October 2023, we entered
into three different consulting and services agreements (the “Consulting Agreements”) with three consultants (the “Consultants”),
pursuant to which we engaged the Consultant to provide certain merger and acquisition consulting service, market research and business
development advisory services, and financial consulting services, respectively. We issued an aggregate of 1,500,000 shares of our common
stock in November 2023 to settle the compensation for the services and recorded $444,300 service expense during the year ended March 31,
2024.
 
Other income, net
 
For the year ended March 31,
2024, we had other income, net of $315,450, which primarily consist of the (1) penalty income of approximately $215,000 from the customers;
(2) income of approximately $35,000 from the disposal of our right-of-use assets and our own vehicles used for operating leases, (3) aggregate
subsidy from the local governments in Changsha and Chengdu of approximately $23,000; and the miscellaneous income of approximately $42,000.
For the year ended March 31, 2023, we had other income, net of $664,001, which primarily consist of the income of approximately $453,000
from the disposal of our right-of-use assets and our own vehicles used for operating leases; and the penalty income of approximately $211,000
from the customers.
 
Interest Expense and Interest Expense on Finance Leases
 Interest expense for the
year ended March 31, 2024 was resulted from the borrowings of XXTX from a financial institution for its working capital turnover and Corenel
from a financial institution for its automobile commercial insurance by installment.

 
Interest expense on finance
leases for the years ended March 31, 2024 and 2023 was $29,088 and $25,675, respectively, representing the interest expense accrued under
financing leases for the leased automobiles Corenel leased from a third-party company, and the leased automobiles rendered to us for sublease
or sale by the online ride-hailing drivers who exited the ride-hailing business.
 
Change in Fair Value of Derivative Liabilities
 
Warrants issued in our registered
direct offerings that took place in September 2019, February 2021 and May 2021, and the August 2020 underwritten public offering, and
the November 2021 private placement were classified as liabilities under the caption “Derivative Liabilities” in the consolidated
balance sheet and recorded at estimated fair value at each reporting date, computed using the Black-Scholes valuation model. The change
in fair value of derivative liabilities for the year ended March 31, 2024 was a gain of $212,949 in total as our stock price as of March
31, 2024 was lower than the price as of March 31, 2023. The following table sets forth the breakdown of the gain in fair value of derivative
liabilities for the years ended March 31, 2024 and 2023:
 


  
For the Years Ended 

  
March 31, 

  
2024  
2023 

  
   
  

- June 2019 registered direct offering 
$6  
$12,432 

- August 2020 underwritten public offering 
 5,231  
 36,131 

- February 2021 registered direct offering 
 7,158  
 54,052 

- May 2021 registered direct offering 
 87,424  
 662,767 

- November 2021 private placement 
 113,130  
 946,507 

Total Change in Fair Value of Derivative Liabilities 
$212,949  
$1,711,889 

 
Income Tax benefit
 
Generally, our subsidiaries
are subject to enterprise income tax on their taxable income in China at a rate of 25%. The enterprise income tax is calculated based
on the entity’s global income as determined under PRC tax laws and accounting standards. For the year ended March 31, 2024, we had
deferred tax benefit of $29,222. Our current income tax of $20,206 represented the provision of enterprise income tax resulting from the
taxable income from Jiekai, while all other subsidiaries in China suffered losses thus no income tax expense was recorded for the year
ended March 31, 2024.
 
Net loss
 
As a result of the foregoing,
net loss for the year ended March 31, 2024 was $4,234,214, representing an increase of $443,521 from net loss of $3,790,693 for the year
ended March 31, 2023.
 


83
 

 
Liquidity and Going Concern
 
We have financed our operations
primarily through proceeds from our equity offerings, stockholder loans, commercial debt and cash flow from operations.
 
We had cash and cash equivalents
of $792,299 as of March 31, 2024 as compared to $1,610,090 as of March 31, 2023. We primarily hold our excess unrestricted cash in short-term
interest-bearing bank accounts at financial institutions.
 
Our business is capital intensive.
We have considered whether there is substantial doubt about our ability to continue as a going concern due to (1) the net loss of approximately
$4.2 million for the year ended March 31, 2024; (2) accumulated deficit of approximately $41.4 million as of March 31, 2024; (3) the working
capital deficit of approximately $2.7 million as of March 31, 2024; and (4) a purchase commitment of approximately $0.9 million for 100
automobiles. As of the filing date of this Report, we have entered into a purchase contract with an automobile dealer to purchase a total
of 100 automobiles in the amount of approximately $1.5 million, of which, approximately $0.6 million has been remitted as purchase prepayments.
The remaining purchase commitment of approximately $0.9 million shall be remitted in installment to be completed before March 31, 2025.
 
We do not believe that the
proceeds from our public offerings and our anticipated cash flows would be sufficient to meet our anticipated working capital requirements
and capital expenditures in the ordinary course of business for the next 12 months from the date of this Report. We have determined there
is substantial doubt about our ability to continue as a going concern. If we are unable to generate significant revenue, we may be required
to cease or curtail our operations. We are trying to alleviate the going concern risk through the following sources:
 

●equity financing to support
our working capital;

 

●other available sources of
financing (including debt) from PRC banks and other financial institutions; and

 

●financial support and credit
guarantee commitments from our related parties.

 
Based on the above considerations,
we are of the opinion that we will probably not have sufficient funds to meet our working capital requirements and debt obligations as
they become due one year from the filing date of this Report, if we are unable to obtain additional financing. However, there is no assurance
that we will be successful in implementing the foregoing plans or that additional capitals will be available to us on commercially reasonable
terms, or at all. There are a number of factors that could potentially arise that could undermine our plans, such as (i) changes in the
demand for our services, (ii) PRC government policies, (iii) economic conditions in China and worldwide, (iv) competitive pricing in the
automobile transaction and related service and ride-hailing industries, (v) changes in our relationships with key business partners, (vi)
that financial institutions in China may not able to provide continued financial support to our customers, and (vii) the perception of
PRC-based companies in the U.S. capital markets. Our inability to secure needed financing when required could require material changes
to our business plans and could have a material adverse effect on our viability and results of operations.
 


  
For the Years Ended 

  
March 31, 

  
2024  
2023 

Net Cash Provided by Operating Activities 
$7,241  
$557,837 

Net Cash Provided by (Used in) Investing Activities 
 (569,608) 
 320,528 

Net Cash Used in Financing Activities 
 (168,340) 
 (373,834)

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash 
 (84,747) 
 (79,662)

Cash, Cash Equivalents and Restricted Cash at Beginning of the Year 
 1,610,090  
 1,185,221 

Cash, Cash Equivalents and Restricted Cash at End of the Year 
$794,636  
$1,610,090 

 
Cash Flow in Operating Activities
 
For the years ended March
31, 2024 and 2023, net cash provided by operating activities was $7,241 and $557,837, respectively.
 
The decrease $550,596 in
net cash provided by operating activities for the year ended March 31, 2024 as compared with the year ended March 31, 2023 was primarily
attributable to (1) decrease of $982,471 in the change of prepayments, other receivables and other assets (both third parties and related
party); (2) increase of $443,521 in net loss; (3) decrease of $475,726 in depreciation of property and equipment and amortization of right-of-use
assets; (4) decrease of $560,695 in the change of accrued expenses and other liabilities (both third parties and due to a related party);
and (5) decrease of $309,314 in the change of inventories, partially offset by (5) increase of $1,498,940 in change of fair value of derivative
liabilities (decrease of related gains); (6) increase of $444,300 in stock-based compensation; (7) increase of $417,721 resulted from
decrease in the gain on disposal of equipment compared with last year and (8) increase of $237,857 resulted from increased provision for
credit losses compared with prior year.
 


84
 

 
Cash Flow in Investing Activities
 
For the year ended March
31, 2024, we had net cash used in investing activities of $569,608. The majority of net cash used in investing activities was for purchase
of automobiles for operating lease purpose of $671,679, which was partially offset by the proceeds from sales of the used-automobiles
and rendered automobiles of $102,071.
 
For the year ended March
31, 2023, we had net cash provided by investing activities of $320,528. The majority of net cash provided by investing activities was
for the proceeds from sales of the used-automobiles and rendered automobiles of $1,498,024, which was partially offset by the expenditures
on the licenses of $26,420 for online ride-hailing platforms in different cities in China and purchase of automobiles for operating lease
purpose of $1,151,076.
 
Cash Flow in Financing Activities
 
For the year ended March
31, 2024, we had net cash used in financing activities of $168,340, which primarily consisted of: (1) loans to related parties and affiliates
of $505,630, (2) principal payments made for finance lease liabilities of $215,443, (3) repayments of current borrowings from a financial
institution of $35,613, partially offset by (4) borrowings from a financial institution of $249,297; and (5) repayment from a related
party of $339,049.
 
For the year ended March
31, 2023, we had net cash used in financing activities of $373,834, which primarily consisted of: (1) principal payments made for finance
lease liabilities of $392,145, (2) repayments of current borrowings from a financial institution of $125,840, partially offset by (3)
repayment from related parties and affiliates of $144,151.
 
Off-Balance Sheet Arrangements 
 
As of the filing date of
this Report, we have the following off-balance sheet arrangements that are likely to have a future effect on our financial condition,
revenues or expenses, results of operations and liquidity:
 

●Purchase Commitments

 
On September 23, 2022, we
entered into a purchase contract with an automobile dealer to purchase a total of 100 automobiles for the amount of approximately $1.5
million, of which approximately $0.6 million has been remitted as purchase prepayments, and we expect to fulfill the purchase commitment
before March 31, 2025.
 

●Contingent Liabilities

 
As of March 31, 2024, Jinkailong
is required by certain financial institutions to provide guarantee on the lease/loan payments (including principal and interests) of the
automobile purchasers referred by it in prior years. The maximum contingent liabilities Jinkailong would be exposed to was approximately
$2.9 million, assuming all the automobile purchasers were in default. As Hunan Ruixi holds 35% of equity interest of Jinkailong and has
not made any consideration towards to the investment, Hunan Ruixi will subject to the maximum amount of RMB3.5 million (approximately
$485,000) of which is equivalent to 35% of liabilities in case Jinkailong is liquidated in accordance with PRC’s company registry
compliance.
 
Inflation
 
We do not believe our business
and operations have been materially affected by inflation.
 
Critical Accounting Estimates
 
Our consolidated financial
statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements
and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources. We have identified certain accounting
estimates that are significant to the preparation of our financial statements. These estimates are important for an understanding of our
financial condition and results of operation. Certain accounting estimates are particularly sensitive because of their significance to
financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s
current judgments. We believe the following critical accounting estimates involve the most significant estimates and judgments used in
the preparation of our financial statements.
 


85
 

 
In presenting the consolidated
financial statements in accordance with U.S. GAAP, management make estimates and assumptions that affect the amounts reported and related
disclosures. Estimates, by their nature, are based on judgement and available information. Accordingly, actual results could differ from
those estimates. On an ongoing basis, management reviews these estimates and assumptions using the currently available information. Changes
in facts and circumstances may cause us to revise our estimates. we base our estimates on past experience and on various other assumptions
that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Estimates are used when accounting for items and matters including, but not limited to the critical accounting estimates as follows.
 
When reading our consolidated financial statements, you should consider
our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the
sensitivity of reported results to changes in conditions and assumptions. Our critical accounting policies and practices include the following:
(i) fair values of financial instruments, including derivative liabilities; (ii) accounts receivable, net; (iii) property and equipment,
net; (iv) intangible assets, net; (v) revenue recognition; and (vi) leases - lessee. See Note 3—Summary of Significant Accounting
Policies to our consolidated financial statements for the disclosure of these accounting policies. We believe the following accounting
estimates involve the most significant judgments used in the preparation of our financial statements.
 

(a)Derivative liabilities

 
A contract is designated
as an asset or a liability and is carried at fair value on a company’s balance sheet, with any changes in fair value recorded in
a company’s results of operations. We then determine which options, warrants and embedded features require liability accounting
and records the fair value as a derivative liability by using Black-Scholes model. The changes in the values of these instruments are
shown in the accompanying consolidated statements of operations and comprehensive loss as “change in fair value of derivative liabilities”.
 

(b)Allowance
                                            for credit losses

  
In June 2016, the FASB issued
ASU No. 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,”
which requires us to measure and recognize expected credit losses for financial assets held and not accounted for at fair value through
net income. We adopted this guidance effective April 1, 2023. ASC 326 introduces an approach based on expected losses to estimate the
allowance for credit losses, which replaces the previous incurred loss impairment model. The adoption of this guidance did not have a
material impact on our consolidated financial statements. Accounts receivable are recognized and carried at original invoiced amount less
an estimated allowance for credit losses. We estimate the allowance for credit losses based on an analysis of the aging of accounts receivable,
assessment of collectability, including any known or anticipated economic conditions, customer-specific circumstances, recent payment
history and other relevant factors.
 


86
 

 
The balance of other receivables
is unsecured and is reviewed periodically to determine whether their carrying value has become impaired. We consider the balances to be
impaired if the collectability of the balances becomes doubtful. We use the individual specific
valuation method to estimate the allowance for uncollectible balances. The allowance is also based on management’s best estimate
of specific losses on individual exposures, as well as a provision on historical trends of collections and utilizations. Actual amounts
received or utilized may differ from management’s estimate of credit worthiness and the economic environment.
 
As of March 31, 2024 and 2023, the allowance for credit losses represented
approximately 4.3% and 0% of gross accounts receivable balances, respectively. The provision is recorded against accounts receivable balances,
with a corresponding charge recorded in the consolidated statements of operations and comprehensive loss. Delinquent account balances
are written-off against the allowance for credit losses after management has determined that the likelihood of collection is not probable.
Allowance for credit losses balances amounted to $1,545 and $0 as of March 31, 2024 and 2023, respectively for accounts receivable. Allowance
for credit losses balances amounted to $20,474 and $0 as of March 31, 2024 and 2023, respectively for deposits and other receivables.
Allowance for credit losses balances amounted to $3,099,701 and $1,481,036 as of March 31, 2024 and 2023, respectively, for amount due
from a related party.
  

(c)Leases - Lessee

 
Finance and operating lease
ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.
Since the implicit rate for our leases is not readily determinable, we use our incremental borrowing rate based on the information available
at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that
we would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and
over a similar term.
 
Lease terms used to calculate
the present value of lease payments generally do not include any options to extend, renew, or terminate the lease, as we do not have reasonable
certainty at lease inception that these options will be exercised. We generally consider the economic life of its operating lease ROU
assets to be comparable to the useful life of similar owned assets. We have elected the short-term lease exception; therefore, operating
lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. The leases generally do not provide
a residual guarantee. The finance or operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line
basis over the lease term for operating lease. Meanwhile, we recognize the finance leases ROU assets and interest on an amortized cost
basis. The amortization of finance ROU assets is recognized on a straight-line basis as amortization expense, while the lease liability
is increased to reflect interest on the liability and decreased to reflect the lease payments made during the period. Interest expense
on the lease liability is determined each period during the lease term as the amount that results in a constant periodic interest rate
of the automobile loans on the remaining balance of the liability.
 
We review the impairment
of our ROU assets consistent with the approach applied for our other long-lived assets. We review the recoverability of its long-lived
assets when events or changes in circumstances occur, indicating that the carrying value of the asset may not be recoverable. The assessment
of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax
cash flows of the related operations. We have elected to include the carrying amount of operating lease liabilities in any tested asset
group and include the associated operating lease payments in the undiscounted future pre-tax cash flows.
 

(d)Impairment of long-lived
assets

 
Long-lived assets, including property and equipment
and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant
adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not
be recoverable. We assess the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate
and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds
expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, we would
reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate,
to comparable market values. For the years ended March 31, 2024 and 2023, we did not recognize impairment
for property and equipment and intangible assets.
 


(e)
Valuation of deferred tax assets

 
Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
 
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
 
Not
required for smaller reporting companies.
 


87
 

 
 Item 8. Financial Statements and Supplementary Data
 
The
financial statements required by this item begin on page F-1 to F-40 hereof.
 
Index
to Financial Statements
 
  Report of Independent Registered Public Accounting Firm (PCOAB ID: 5395)   F-2  Financial Statements:      Consolidated Balance Sheets as of March 31, 2024 and 2023   F-3  Consolidated Statements of Operations and Comprehensive Loss for the Years Ended March 31, 2024 and 2023   F-4  Consolidated Statements of Changes in Equity for the Years Ended March 31, 2024 and 2023   F-5  Consolidated Statements of Cash Flows for the Years Ended March 31, 2024 and 2023   F-6  Notes to Consolidated Financial Statements   F-7 
 


F-1
 

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
 
To the Stockholders and Board of Directors of
Senmiao Technology Limited
 
Opinion on the Financial Statements
 
We have audited the accompanying consolidated
balance sheets of Senmiao Technology Limited (the “Company”) as of March 31, 2024 and 2023, the related consolidated statements
of operations and comprehensive loss, changes in equity and cash flows for each of the two years in the period ended March 31,
2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024 and 2023, and
the results of its operations and its cash flows for each of the two years in the period ended March 31, 2024, in conformity with accounting
principles generally accepted in the United States of America.
 
Explanatory Paragraph – Going Concern
 
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has a significant
working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its
operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in
regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
 
Basis for Opinion
 
These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on
the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audits included performing procedures to
assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
 
Critical Audit Matters
 
Critical audit matters are matters arising
from the current period audits of the consolidated financial statements that were communicated or required to be communicated to the
audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2)
involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
 
/s/ Marcum Asia CPAs LLP
 
Marcum Asia CPAs LLP
 
We have served as the Company’s auditor since 2018.
(such date takes into account the acquisition of certain assets of
Friedman LLP by Marcum Asia CPAs LLP effective September 1, 2022)
 
New York, New York
June 27, 2024
 


F-2
 

 
SENMIAO TECHNOLOGY LIMITED
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollar, except for the number
of shares)
 


  
March 31,  
March 31, 

  
2024  
2023 

ASSETS 
   
  

Current assets 
   
  

Cash and cash equivalents 
$792,299  
$1,610,090 

Restricted cash 
 2,337  
 — 

Accounts receivable, net 
 34,013  
 158,435 

Accounts receivable, a related party 
 —  
 6,312 

Inventories 
 —  
 6,678 

Finance lease receivables, current 
 144,166  
 146,114 

Prepayments, other receivables and other current assets, net 
 1,022,813  
 1,438,243 

Due from related parties, net, current 
 655,532  
 1,488,914 

Total current assets 
 2,651,160  
 4,854,786 

  
    
   

Property and equipment, net 
 2,676,524  
 3,343,457 

  
    
   

Other assets 
    
   

Operating lease right-of-use assets, net 
 60,862  
 121,672 

Operating lease right-of-use assets, net, related parties 
 47,128  
 92,916 

Financing lease right-of-use assets, net 
 355,383  
 623,714 

Intangible assets, net 
 590,727  
 774,324 

Finance lease receivable, non-current 
 92,524  
 71,133 

Due from a related party, net, non-current 
 2,747,313  
 3,640,206 

Other non-current assets 
 639,863  
 716,407 

Total other assets 
 4,533,800  
 6,040,372 

  
    
   

Total assets 
$9,861,484  
$14,238,615 

  
    
   

LIABILITIES, MEZZANNIE EQUITY AND EQUITY 
    
   

Current liabilities 
    
   

Borrowings from a financial institution, current 
$142,456  
$8,813 

Accounts payable 
 140,532  
 183,645 

Advances from customers 
 122,461  
 148,188 

Income tax payable 
 20,019  
 — 

Accrued expenses and other liabilities 
 3,648,407  
 3,377,507 

Due to related parties 
 170,986  
 8,667 

Operating lease liabilities, current 
 14,007  
 60,878 

Operating lease liabilities - related parties 
 51,741  
 143,462 

Financing lease liabilities, current 
 279,768  
 264,052 

Derivative liabilities 
 288,833  
 501,782 

Current liabilities - discontinued operations 
 464,000  
 487,829 

Total current liabilities 
 5,343,210  
 5,184,823 

  
    
   

Other liabilities 
    
   

Borrowings from a financial institution, non-current 
 71,228  
 — 

Operating lease liabilities, non-current 
 20,430  
 83,485 

Operating lease liabilities, non-current - related parties 
 —  
 42,247 

Financing lease liabilities, non-current 
 126,637  
 388,064 

Deferred tax liability 
 11,611  
 42,930 

Total other liabilities 
 229,906  
 556,726 

  
    
   

Total liabilities 
 5,573,116  
 5,741,549 

  
    
   

Commitments and contingencies (note 19) 
    
   

  
    
   

Mezzanine Equity 
    
   

Series A convertible preferred stock (par value $1,000 per share, 5,000 shares authorized; 991 and 1,641 shares issued and outstanding at March 31, 2024 and March 31, 2023, respectively) 
 234,364  
 269,386 

  
    
   

Stockholders’ equity 
    
   

Common stock (par value $0.0001 per share, 500,000,000 shares authorized; 10,518,040 and 7,743,040 shares issued and outstanding at March 31, 2024 and March 31, 2023, respectively)* 
 1,051  
 773 

Additional paid-in capital 
 43,950,123  
 43,355,834 

Accumulated deficit 
 (41,384,268) 
 (37,715,294)

Accumulated other comprehensive loss 
 (1,672,005) 
 (1,247,099)

Total Senmiao Technology Limited stockholders’ equity 
 894,901  
 4,394,214 

  
    
   

Non-controlling interests 
 3,159,103  
 3,833,466 

  
    
   

Total equity 
 4,054,004  
 8,227,680 

  
    
   

Total liabilities, mezzanine equity and equity 
$9,861,484  
$14,238,615 

 
  * Giving retroactive effect to the 1-for-10 reverse stock split effected on April 6, 2022 
 
The accompanying notes are an integral part of the consolidated financial
statements
 


F-3
 

 
SENMIAO TECHNOLOGY LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
(Expressed in U.S. dollar, except for the number
of shares)
 


  
For the Years Ended March 31, 

  
2024  
2023 

  
   
  

Revenues 
   
  

Revenues 
$6,779,686  
$7,738,394 

Revenues, a related party 
 34,742  
 344,120 

Total revenues 
 6,814,428  
 8,082,514 

  
    
   

Cost of revenues 
    
   

Cost of revenues 
 (4,781,009) 
 (6,080,097)

Cost of revenues, a related party 
 (472,848) 
 (509,904)

Total cost of revenues 
 (5,253,857) 
 (6,590,001)

  
    
   

Gross profit 
 1,560,571  
 1,492,513 

  
    
   

Operating expenses 
    
   

Selling, general and administrative expenses 
 (4,115,436) 
 (6,142,447)

Allowance for credit losses 
 (1,725,746) 
 (1,487,889)

Impairments of inventories 
 —  
 (3,085)

Stock-based compensation 
 (444,300) 
 — 

Total operating expenses 
 (6,285,482) 
 (7,633,421)

  
    
   

Loss from operations 
 (4,724,911) 
 (6,140,908)

  
    
   

Other income (expense) 
    
   

Other income, net 
 315,450  
 664,001 

Interest expense 
 (17,630) 
 — 

Interest expense on finance leases 
 (29,088) 
 (25,675)

Change in fair value of derivative liabilities 
 212,949  
 1,711,889 

Total other income, net 
 481,681  
 2,350,215 

  
    
   

Loss before income taxes 
 (4,243,230) 
 (3,790,693)

  
    
   

Income tax benefit 
 9,016  
 — 

  
    
   

Net Loss 
 (4,234,214) 
 (3,790,693)

  
    
   

Net loss attributable to non-controlling interests from operations 
 565,240  
 676,944 

  
    
   

Net loss attributable to the Company’s stockholders 
$(3,668,974) 
$(3,113,749)

  
    
   

Net loss 
$(4,234,214) 
$(3,790,693)

  
    
   

Other comprehensive loss 
    
   

Foreign currency translation adjustment 
 (418,784) 
 (1,103,510)

  
    
   

Comprehensive loss 
 (4,652,998) 
 (4,894,203)

  
    
   

less: Total comprehensive loss attributable to non-controlling interests 
 (527,591) 
 (642,809)

  
    
   

Total comprehensive loss attributable to stockholders 
$(4,125,407) 
$(4,251,394)

  
    
   

Weighted average number of common stock 
    
   

Basic and diluted 
 8,863,190  
 7,195,781 

Net loss per share - basic and diluted* 
$(0.41) 
$(0.43)

 
  * Giving retroactive effect to the 1-for-10 reverse stock split effected on April 6, 2022 
 
The accompanying notes are an integral part of the consolidated financial
statements
 


F-4
 

 
SENMIAO TECHNOLOGY LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
For the Years Ended March 31, 2024 and 2023
(Expressed in U.S. dollar, except for the number
of shares)
 


  
   
   
   
   
Accumulated  
   
  

  
   
   
Additional  
   
other  
Non-  
  

  
Common
    stock  
paid-in  
Accumulated  
comprehensive  
controlling  
Total 

  
Shares  
Par
    value  
capital*  
deficit  
loss  
interest  
equity 

BALANCE,
    March 31, 2022 
 6,186,783  
$618  
$42,803,045  
$(34,601,545) 
$(109,454) 
$4,476,275  
$12,568,939 

Net
    loss 
 —  
 —  
 —  
 (3,113,749) 
 —  
 (676,944) 
 (3,790,693)

Conversion
    of preferred stock into common stock 
 1,546,125  
 155  
 551,256  
 —  
 —  
 —  
 551,411 

Cashless
    exercise of November 2021 Investor warrants into common stock 
 10,132  
 —  
 —  
 —  
 —  
 —  
 — 

Fair
    value of derivative liabilities upon exercise of warrants 
 —  
 —  
 1,533  
 —  
 —  
 —  
 1,533 

Foreign
    currency translation adjustment 
 —  
 —  
 —  
 —  
 (1,137,645) 
 34,135  
 (1,103,510)

BALANCE,
    March 31, 2023 
 7,743,040  
 773  
 43,355,834  
 (37,715,294) 
 (1,247,099) 
 3,833,466  
 8,227,680 

Net
    loss 
 —  
 —  
 —  
 (3,668,974) 
 —  
 (565,240) 
 (4,234,214)

Conversion
    of preferred stock into common stock 
 325,000  
 33  
 34,989  
 —  
 —  
 —  
 35,022 

Issuance
    of common stock for consulting service 
 1,500,000  
 150  
 444,150  
 —  
 —  
 —  
 444,300 

Issuance
    of common stock in purchase of Hunan Ruixi’s NCI 
 950,000  
 95  
 115,150 
 —  
 31,527  
 (146,772)  
 — 

Foreign
    currency translation adjustment 
 —  
 —  
 —  
 —  
 (456,433) 
 37,649  
 (418,784)

BALANCE,
    March 31, 2024 
 10,518,040  
$1,051  
$43,950,123  
 (41,384,268) 
$(1,672,005) 
$3,159,103  
$4,054,004 

 

*Giving retroactive effect to the 1-for-10 reverse stock split
effected on April 6, 2022

 
The accompanying notes are an integral part of the consolidated financial
statements
 


F-5
 

 
SENMIAO TECHNOLOGY LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollar, except for the number
of shares)
 


  
For the Years Ended March 31, 

  
2024  
2023 

  
   
  

Cash Flows from Operating Activities: 
   
  

Net loss 
$(4,234,214) 
$(3,790,693)

Adjustments to reconcile net loss to net cash provided by operating activities: 
    
   

Depreciation of property and equipment 
 933,395  
 1,095,518 

Stock-based compensation 
 444,300  
 — 

Amortization of right-of-use assets 
 398,027  
 711,630 

Amortization of intangible assets 
 172,135  
 184,215 

Allowance for credit losses 
 1,725,746  
 1,487,889 

Impairments of inventories 
 —  
 3,085 

Gain on disposal of equipment 
 (34,801) 
 (452,522)

Gain from lease modification 
 (18,272) 
 — 

Change in fair value of derivative liabilities 
 (212,949) 
 (1,711,889)

Deferred tax benefit 
 (29,222) 
 — 

Change in operating assets and liabilities 
    
   

Accounts receivable 
 115,567  
 224,673 

Accounts receivable, a related party 
 6,048  
 (6,327)

Inventories 
 6,825  
 316,139 

Finance lease receivables 
 162,687  
 258,932 

Prepayments, other receivables and other current assets 
 213,994  
 1,046,465 

Due from a related party 
 (150,000) 
 — 

Accounts payable 
 169,376  
 170,703 

Advances from customers 
 (18,626) 
 36,911 

Income tax payable 
 20,167  
 — 

Accrued expenses and other liabilities 
 450,005  
 1,170,510 

Due to a related party 
 159,810  
 — 

Operating lease liabilities 
 (62,565) 
 (53,620)

Operating lease liabilities - related parties 
 (210,192) 
 (133,782)

Net Cash Provided by Operating Activities 
 7,241  
 557,837 

  
    
   

Cash Flows from Investing Activities: 
    
   

Purchases of property and equipment 
 (671,679) 
 (1,151,076)

Cash received from disposal of property and equipment 
 102,071  
 1,498,024 

Purchases of intangible assets 
 —  
 (26,420)

Net Cash Provided by (Used in) Investing Activities 
 (569,608) 
 320,528 

  
    
   

Cash Flows from Financing Activities: 
    
   

Borrowings from a financial institution 
 249,297  
 — 

Repayments from related parties and affiliates 
 339,049  
 144,151 

Loans to related parties and affiliates 
 (505,630) 
 — 

Repayments of current borrowings from financial institutions 
 (35,613) 
 (125,840)

Principal payments of finance lease liabilities 
 (215,443) 
 (392,145)

Net Cash Used in Financing Activities 
 (168,340) 
 (373,834)

  
    
   

Effect of exchange rate changes on cash, cash equivalents and restricted cash 
 (84,747) 
 (79,662)

  
    
   

Net increase (decrease) in cash, cash equivalents and restricted cash 
 (815,454) 
 424,869 

Cash, cash equivalents and restricted cash, beginning of the year 
 1,610,090  
 1,185,221 

Cash, cash equivalents and restricted cash, end of the year 
 794,636  
 1,610,090 

  
    
   

Supplemental Cash Flow Information 
    
   

Cash paid for interest expense 
$17,630  
$— 

Cash paid for income tax 
$379  
$— 

  
    
   

Non-cash Transaction in Investing and Financing Activities 
    
   

Settlement of accounts payable by a related party 
$86,572  
$— 

Recognition of right-of-use assets and lease liabilities 
$—  
$917,786 

Recognition of right-of-use assets and lease liabilities, related parties 
$349,186  
$121,742 

Modification of right-of use assets and lease liabilities 
$22,799  
$47,438 

Termination of right-of use assets and lease liabilities, related parties 
$264,818  
$302,010 

Cashless exercise of November 2021 Investor warrants into common stock 
$—  
$1,533 

 
The following tables provides a reconciliation
of cash, cash equivalent and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts
shown in the consolidated statements of cash flows:
 


  
March 31,  
March 31, 

  
2024  
2023 

Cash, cash equivalent, end of the year 
$792,299  
$1,610,090 

Restricted cash, end of the year 
 2,337  
 — 

Total cash, cash equivalent and restricted
    cash shown in the consolidated statements of cash flows, end of the year 
$794,636  
$1,610,090 

 


  
March 31,  
March 31, 

  
2024  
2023 

Cash, cash equivalent, beginning of the year 
$1,610,090  
$1,185,221 

Restricted cash, beginning of the year 
 —  
 — 

Total cash, cash equivalent and restricted
    cash shown in the consolidated statements of cash flows, beginning of the year 
$1,610,090  
$1,185,221 

 
The accompanying notes are an integral part of the consolidated financial
statements
 

F-6
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 
1. ORGANIZATION AND PRINCIPAL
ACTIVITIES
 
Senmiao
Technology Limited (the “Company”) is a U.S. holding company incorporated in the State of Nevada on June 8, 2017.
The Company operates its business in two segments:
 

(i) automobile
transaction and related services focusing on the online ride-hailing industry in the People’s Republic of China (“PRC”
or “China”) through the Company’s wholly owned subsidiary, Chengdu Corenel Technology Co., Ltd., a PRC limited liability
company (“Corenel”), and its majority owned subsidiaries, Chengdu Jiekai Yunli Technology Co., Ltd. (“Jiekai”),
and Hunan Ruixi Financial Leasing Co., Ltd., a PRC limited liability company (“Hunan Ruixi”), and its equity investee company
(an entity 35% owned by Hunan Ruixi), Sichuan Jinkailong Automobile Leasing Co., Ltd., a PRC limited liability company (“Jinkailong”).
 
(ii) online
ride-hailing platform services through its own platform (known as Xixingtianxia) as described further below, since October 2020,
through Hunan Xixingtianxia Technology Co., Ltd., a PRC limited liability company (“XXTX”), which is a wholly owned subsidiary
of Sichuan Senmiao Zecheng Business Consulting Co., Ltd. (“Senmiao Consulting”), a PRC limited liability company and wholly-owned
subsidiary of the Company. The Company’s ride hailing platform enables qualified ride-hailing drivers to provide transportation
services in Chengdu, Changsha and other 20 cities in China as of the filing date of these consolidated financial statements.
 
Hunan Ruixi
holds a business license for automobile sales and financial leasing and has been engaged in automobile financial leasing services
and automobile sales since March 2019 and January 2019, respectively. The Company also has been engaged in operating leasing services
through Hunan Ruixi, Jiekai and its equity investee company, Jinkailong since March 2019. Jinkailong used to facilitate automobile sales
and financing transactions for its clients, who are primarily ride-hailing drivers and provides them operating lease and relevant after-transaction
services.
 
As of the
filing date of these consolidated financial statements, Senmiao Consulting has made a cumulative capital contribution of RMB40.41 million
(approximately $5.60 million) to XXTX and the remaining amount is expected to be paid before December 31, 2025. As of March 31, 2024,
XXTX had eight wholly owned subsidiaries and two of them have operations.
 
The following
diagram illustrates the Company’s corporate structure as of the filing date of these consolidated financial statements:
 
 


F-7
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Former
Voting Agreements with Jinkailong’s Other Shareholders
 
Hunan Ruixi
entered into two voting agreements signed in August 2018 and February 2020, respectively, as amended (the “Voting Agreements”),
with Jinkailong and other Jinkailong’s shareholders holding an aggregate of 65% equity interests. Pursuant to the Voting Agreements,
all other Jinkailong’s shareholders will vote in concert with Hunan Ruixi on all fundamental corporate transactions in the event
of a disagreement for periods of 20 years and 18 years, respectively, ending on August 25, 2038.
 
On March
31, 2022, Hunan Ruixi entered into an Agreement for the Termination of the Agreement for Concerted Action by Shareholders of Jinkailong
(the “Termination Agreement”), pursuant to which the Voting Agreements mentioned above was terminated as of the date of the
Termination Agreement. The termination will not impair the past and future legitimate rights and interests of all parties in Jinkailong.
As of March 31, 2024 and 2023, the parties no longer maintain a concerted action relationship with respect to the decision required to
take concerted action at its shareholders meetings as stipulated in the Voting Agreements. Each party shall independently express opinions
and exercise various rights such as voting rights and perform relevant obligations in accordance with the provisions of laws, regulations,
normative documents and the Jinkailong’s articles of association. 
As a result
of the Termination Agreement, the Company no longer has a controlling financial interest in Jinkailong and has determined that Jinkailong
was deconsolidated from the Company’s Consolidated Financial Statements effective as of March 31, 2022. However, as Hunan Ruixi
still holds 35% equity interests in Jinkailong, Jinkailong is the equity investee company of the Company since then. As of March
31, 2024 and 2023, the paid-in capital of Jinkailong is zero.
 
As
of March 31, 2024, the Company has outstanding balance due from Jinkailong amounted to $3,245,907, net of allowance for credit losses,
of which, $2,747,313 is to be repaid over a period from April 2025 to December 2026,
classified as due from a related party, net, non-current portion. As of March 31, 2023, the Company has outstanding balance due from Jinkailong
amounted to $5,106,100, net of allowance for credit losses, of which, $3,640,206 is to be repaid over a period from April 2024 to
December 2026, classified as due from a related party, net, non-current portion (refer to Note 17).
 
As of March
31, 2024 and 2023, allowance for credit losses due from Jinkailong amounted to $3,099,701 and $1,481,036, respectively. During the years
ended March 31, 2024 and 2023, the Company recorded provision for credit losses against the balance due from Jinkailong of $1,703,563
and $1,484,495, respectively.
 
2. GOING
CONCERN
 
In assessing
the Company’s liquidity, the Company monitors and analyzes its cash on-hand and its operating and capital expenditure commitments.
The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations.
Debt financing from financial institutions and equity financings have been utilized to finance the working capital requirements of the
Company.
 
The Company’s
business is capital intensive. The Company’s management has considered whether there is substantial doubt about its ability to continue
as a going concern due to (1) the net loss of approximately $4.2 million for the year ended March 31, 2024; (2) accumulated deficit
of approximately $41.4 million as of March 31, 2024; (3) the working capital deficit of approximately $2.7 million as of March
31, 2024; and (4) one purchase commitment of approximately $0.9 million for 100 automobiles. As of the filing date of these
consolidated financial statements, the Company has entered into one purchase contract with an automobile dealer to purchase a total of
100 automobiles in the amount of approximately $1.5 million, of which, and approximately $0.6 million has been remitted as purchase
prepayments. The remaining purchase commitment of approximately $0.9 million shall be remitted in installment to be completed before
March 31, 2025.
 
Management
has determined there is substantial doubt about its ability to continue as a going concern. If the Company is unable to generate significant
revenue, the Company may be required to curtail or cease its operations. Management is trying to alleviate the going concern risk through
the following sources:
 

●Equity
financing to support its working capital;

 

●Other
available sources of financing (including debt) from PRC banks and other financial institutions; and

 

●Financial
support and credit guarantee commitments from the Company’s related parties.
 



F-8
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Based on
the above considerations, management is of the opinion that the Company will probably not have sufficient funds to meet its working capital
requirements and debt obligations as they become due one year from the filing date of these consolidated financial statements if the Company
is unable to obtain additional financing. There is no assurance that the Company will be successful in implementing the foregoing plans
or that additional financing will be available to the Company on commercially reasonable terms, or at all. There are a number of factors
that could potentially arise that could undermine the Company’s plans, such as (i) changes in the demand for the Company’s
services, (ii) PRC government policies, (iii) economic conditions in China and worldwide, (iv) competitive pricing in the automobile transaction
and related service and ride-hailing industries, (v) changes in the Company’s relationships with key business partners, (vi) the
ability of financial institutions in China to provide continued financial support to the Company’s customers, and (vii) the perception
of PRC-based companies in the U.S. capital markets. The Company’s inability to secure needed financing when required could require
material changes to the Company’s business plans and could have a material adverse effect on the Company’s ability to continue
as a going concern and results of operations. The consolidated financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and liquidation of liabilities in the normal course of business. The consolidated financial statements
do not include any adjustments that might result from the outcome of such uncertainties.
 
3. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
 
(a) Basis of presentation
 
The accompanying
consolidated financial statements of the Company has been prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”).
 
The consolidated
financial statements include the accounts of the Company and include the assets, liabilities, revenues, and expenses of the subsidiaries.
All inter-company accounts and transactions have been eliminated in consolidation. A subsidiary is an entity in which the Company, directly
or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint
or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.
 
All adjustments
(including normal recurring adjustments) necessary to present a fair statement of the Company’s financial position as of March 31,
2024, its results of operations for the year ended March 31, 2024 and its cash flows for the year ended March 31, 2024, as applicable,
have been made. 
 
(b) Foreign currency translation
 
Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing
on the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated
into the functional currency using the applicable exchange rates on the date of the balance sheet. The resulting exchange differences
are recorded in the statement of operations.
 
The reporting
currency of the Company and its subsidiaries is U.S. dollars (“US$”) and the consolidated financial statements have been expressed
in US$. However, the Company maintains the books and records in its functional currency, Chinese Renminbi (“RMB”), being the
functional currency of the economic environment in which its operations are conducted.
 
In general,
for consolidation purposes, assets and liabilities of the Company and its subsidiaries whose functional currency is not the US$, are translated
into US$, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the
period. The gains and losses resulting from translation of financial statements of the Company and its subsidiaries are recorded as a
separate component of accumulated other comprehensive loss within the consolidated statements of changes in stockholders’ equity.
 
Translation
of amounts from RMB into US$ has been made at the following exchange rates for the respective periods:
 


  
March 31,  
March 31, 

  
2024  
2023 

Balance sheet items, except for equity accounts – RMB: US$1: 
 7.2203  
 6.8676 

 


  
For the years ended 
March 31, 

  
2024  
2023 

Items in the statements of operations and comprehensive loss, and cash flows – RMB: US$1: 
 7.1671  
 6.8516 
 



F-9
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(c) Use of estimates
 
In presenting
the consolidated financial statements in accordance with U.S. GAAP, management makes estimates and assumptions that affect the amounts
reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results
could differ from those estimates. On an ongoing basis, management reviews these estimates and assumptions using the currently available
information. Changes in facts and circumstances may cause the Company to revise its estimates. The Company bases its estimates on past
experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments
about the carrying values of assets and liabilities. Estimates are used when accounting for items and matters including, but not limited
to, revenue recognition, residual values of property and equipment, lease classification and liabilities, right-of-use assets, determinations
of the useful lives and valuation of long-lived assets, estimates of allowances for credit losses for receivables, due from related parties,
estimates of impairment of long-lived assets, valuation of deferred tax assets and valuation of derivative liabilities.

 
(d) Fair values of financial
instruments
 
Accounting
Standards Codification (“ASC”) Topic 825, Financial Instruments (“Topic 825”) requires disclosure of fair value
information of financial instruments, whether or not recognized in the balance sheets, for which it is practicable to estimate that value.
In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Topic
825 excludes certain financial instruments and all nonfinancial assets and liabilities from its disclosure requirements. Accordingly,
the aggregate fair value amounts do not represent the underlying value of the Company. The three levels of valuation hierarchy are defined
as follows:
 
Level 1
Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
 
Level 2
Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable
for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
 
Level 3
Inputs to the valuation methodology are unobservable and significant to the fair value.
 
The following
table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on
a recurring basis as of March 31, 2024 and 2023:
 


  
Carrying  Value as of  
Fair Value Measurement as of 

  
March 31,  
March 31, 2024 

  
2024  
Level 1  
Level 2  
Level 3 

  
    
    
    
   

Derivative liabilities 
$288,833  
$—  
$—  
$288,833 

 


  
Carrying  Value as of  
Fair Value Measurement as of 

  
March 31,  
March 31, 2023 

  
2023  
Level 1  
Level 2  
Level 3 

Derivative liabilities 
$501,782  
$—  
$—  
$501,782 

  
    
    
    
   
 



F-10
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The following
is a reconciliation of the beginning and ending balance of the assets and liabilities measured at fair value on a recurring basis for
years ended March 31, 2024 and 2023:
 


  
2019
    Registered Direct Offering  
August
    2020 Underwritten Public  
February
    2021 Registered Direct  
May
    2021 Registered Direct Offering  
November
    2021 Private Placement  
  

  
Series A
    Warrants  
Placement
    Warrants  
Offering
    Warrants  
Offering
    Warrants  
Investors
    Warrants  
Placement
    Warrants  
Investors
    Warrants  
Placement
    Warrants  
Total 

BALANCE
    as of March 31, 2022 
$1,913  
$10,525  
$44,581  
$65,543  
$778,488  
$58,387  
$1,165,465  
$90,302  
$2,215,204 

Change
    in fair value of derivative liabilities 
 (1,912) 
 (10,520) 
 (36,131) 
 (54,052) 
 (616,527) 
 (46,240) 
 (879,170) 
 (67,337) 
 (1,711,889)

Cashless
    exercise on November 2021 investor warrants 
 —  
 —  
 —  
 —  
 —  
 —  
 (1,533) 
 —  
 (1,533)

BALANCE
    as of March 31, 2023 
 1  
 5  
 8,450  
 11,491  
 161,961  
 12,147  
 284,762  
$22,965  
$501,782 

Change
    in fair value of derivative liabilities 
    
    
 (5,231) 
 (7,158) 
 (81,325) 
 (6,099) 
 (105,242) 
 (7,888) 
 (212,943)

Warrant
    forfeited due to expiration 
 (1) 
 (5) 
 —  
 —  
 —  
 —  
 —  
 —  
 (6)

BALANCE
    as of March 31, 2024 
$—  
$—  
$3,219  
 4,333  
 80,636  
 6,048  
 179,520  
 15,077  
 288,833 

 
The Company’s
Series A and Series B warrants, the June 2019 Placement Agent Warrants, the Underwriters’ Warrants, the ROFR Warrants, the May 2021
Investors Warrants, the May 2021 Placement Agent Warrants, and the November 2021 Investors Warrants and November 2021 Placement Agent
Warrants are not traded in an active securities market; therefore, the Company estimates the fair value to those warrants using the Black-Scholes
valuation model on June 20, 2019 (the grant date), August 4, 2020 (the grant date), February 10, 2021 (the grant date), May 13, 2021 (the
grant date), November 10, 2021 (the grant date), as of March 31, 2024 and 2023.
 
     June 20, 2019   August 4, 2020   February 10, 2021   May 13, 2021   November 10, 2021      Series A   Series B   Placement Agent   Underwriters’   Placement Agent   ROFR   Investor   Placement Agent   Investor   Placement Agent      Warrants   Warrants   Warrants   Warrants   Warrants   Warrants   Warrants   Warrants   Warrants   Warrants   # of shares exercisable*   133,602    111,632    14,251    56,800    38,044    15,218    553,192    41,490    5,310,763    55,148   Valuation date   6/20/2019    6/20/2019    6/20/2019    8/4/2020    2/10/2021    2/10/2021    5/13/2021    5/13/2021    11/10/2021    11/10/2021   Exercise price*  $37.20   $37.20   $33.80   $6.30   $13.80   $17.30   $10.50   $10.50   $1.13   $6.80   Stock price*  $28.00   $28.00   $28.00   $5.10   $16.30   $16.30   $7.20   $7.20   $6.70   $6.70   Expected term (years)   4    1    4    5    5    5    5    5    5    5   Risk-free interest rate   1.77%   1.91%   1.77%   0.19%   0.46%   0.46%   0.84%   0.84%   1.23%   1.23%  Expected volatility   86%   91%   86%   129%   132%   132%   131%   131%   126%   126%  



F-11
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
     As of March 31, 2024      August 4, 2020   February 10, 2021   May 13, 2021   November 10, 2021          Placement           Placement       Placement      Underwriters’   Agent   ROFR   Investor   Agent   Investor   Agent   Granted Date  Warrants   Warrants   Warrants   Warrants   Warrants   Warrants   Warrants   # of shares exercisable   31,808    38,044    15,218    553,192    41,490    5,310,763    55,148   Valuation date   3/31/2024    3/31/2024    3/31/2024    3/31/2024    3/31/2024    3/31/2024    3/31/2024   Exercise price  $6.30   $13.8   $17.30   $10.50   $10.50   $1.13   $1.13   Stock price  $0.9   $0.9   $0.9   $0.9   $0.9   $0.9   $0.9   Expected term (years)   1.35    1.87    1.87    2.12    2.12    2.61    2.61   Risk-free interest rate   4.88%   4.65%   4.65%   4.57%   4.57%   4.47%   4.47%  Expected volatility   117%   117%   117%   117%   117%   117%   117% 
 
     As of March 31, 2023      June 20, 2019   August 4, 2020   February 10, 2021   May 13, 2021   November 10, 2021          Placement       Placement           Placement       Placement      Series A   Agent   Underwriters’   Agent   ROFR   Investor   Agent   Investor   Agent   Granted Date  Warrants   Warrants   Warrants   Warrants   Warrants   Warrants   Warrants   Warrants   Warrants   # of shares exercisable   2,590    14,251    31,808    38,044    15,218    553,192    41,490    5,310,763    55,148   Valuation date   3/31/2023    3/31/2023    3/31/2023    3/31/2023    3/31/2023    3/31/2023    3/31/2023    3/31/2023    3/31/2023   Exercise price  $5.00   $5.00   $6.30   $13.80   $17.30   $10.50   $10.50   $1.13   $6.80   Stock price  $0.90   $0.90   $0.90   $0.90   $0.90   $0.90   $0.90   $0.90   $0.90   Expected term (years)   0.22    0.22    2.35    2.87    2.87    3.12    3.12    3.62    3.62   Risk-free interest rate   1.02%   1.02%   4.02%   3.95%   4.43%   3.80%   3.80%   3.74%   3.74%  Expected volatility   120%   120%   120%   120%   120%   120%   120%   120%   120% 
 

*Giving
retroactive effect to the 1-for-10 reverse stock split effected on April 6, 2022.
 



F-12
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
As of March
31, 2024 and 2023, financial instruments of the Company comprised primarily current assets and current liabilities including cash and
cash equivalents, restricted cash, accounts receivable, inventories, finance lease receivables, prepayments, other receivables and other
assets, due from related parties, accounts payable, advance from customers, lease liabilities, accrued expenses and other liabilities,
due to related parties, and operating and financing lease liabilities, which approximate their fair values because of the short-term nature
of these instruments, and current liabilities of borrowings from a financial institution, which approximate their fair values because
of the stated loan interest rate to the rate charged by similar financial institutions.
 
The non-current
portion of finance lease receivables, operating and financing lease liabilities and borrowings from a financial institution were recorded
at the gross amount adjusted for the interest using the effective interest rate method. The Company believes that the effective interest
rates underlying these instruments approximate their fair values because the Company used its incremental borrowing rate to recognize
the present value of these instruments as of March 31, 2024 and 2023.
 
Other than
as listed above, the Company did not identify any assets or liabilities that are required to be presented on the balance sheet at fair
value. 
 
(e) Equity
method investments
 
The Company
accounts for investments in private company by using equity method as the Company determined that it does not have control over Jinkailong
under either voting or VIE models in accordance with ASC 323 “Investments- Equity Method and Joint Ventures”. As of March
31, 2024 and 2023, the Company had equity investment in Jinkailong of 35% that the Company has significant influence over Jinkailong.
The Company records equity method investments initially at cost and subsequently records its share of the earnings or losses of the investee
in the periods for which they are reported by the investee in its financial statements rather than in the period in which an investee
declares a dividend. The Company adjusts the carrying amount of an investment for its share of the earnings or losses of the investee
after the date of investment and share report the recognized earnings or loses in income. If an investment balance is reduced to zero
as a result of cumulative losses, the Company will need to pause the recognition of losses until its share of earnings exceeds the accumulated
losses resulting in the investment balance returning to zero. As of March 31, 2024 and 2023, the carrying value of the investment is $0 for
both periods presented.
 
(f) Business
combinations and non-controlling interests
 
The Company
accounts for its business combinations using the acquisition method of accounting in accordance with ASC 805 “Business Combinations.”
The cost of an acquisition is measured at the aggregate of the acquisition date fair value of the assets transferred to the sellers and
liabilities incurred by the Company and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed
as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition
date, irrespective of the extent of any non-controlling interests. The excess of (i) the total costs of acquisition, fair value of the
non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value
of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the
net assets of the subsidiary acquired, the difference is recognized directly in the consolidated income statements. During the measurement
period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities
assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values
of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated income statements.
 
For the
Company’s non-wholly owned subsidiaries, a non-controlling interest is recognized to reflect portion of equity that is not attributable,
directly or indirectly, to the Company. The cumulative results of operations attributable to non-controlling interests are also recorded
as non-controlling interests in the Company’s consolidated balance sheets and consolidated statements of operations and comprehensive
loss. Cash flows related to transactions with non-controlling interests are presented under financing activities in the consolidated statements
of cash flows.
 
(g) Segment
reporting
 
Operating
segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (the
“CODM”), which is comprised of certain members of the Company’s management team. During the years ended March 31,
2019 and 2021, the Company acquired Hunan Ruixi and XXTX, respectively. The Company evaluated how the CODM manages the businesses of
the Company to maximize efficiency in allocating resources and assessing performance. Consequently, the Company
presents two operating and reportable segments of automobile transaction and related services and online ride-hailing
platform services as set forth in Notes 1 and 20. 


F-13
 

 
SENMIAO
TECHNOLOGY LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
(h)
Cash and cash equivalents
 
Cash
and cash equivalents primarily consist of bank deposits with original maturities of three months or less, which are unrestricted as to
withdrawal and use. Cash and cash equivalents also consist of funds received from automobile purchasers as payments for automobiles,
funds received from automobile lessees as payments for rentals, which were held at the third-party platforms’ fund accounts and
which are unrestricted and immediately available for withdrawal and use.
 
(i)
Restricted cash
 
Restricted
cash consists of fund held in the bank accounts of Corenel was frozen by a court order with a prior business partner whom Corenel had
cooperation with. The restricted cash of Corenel was approximately $2,337 as of March 31, 2024.
 
(j) Accounts receivable,
net
 
Accounts
receivable are recorded at the invoiced amount less an allowance for any uncollectible accounts and do not bear interest, and are due
on demand. The carrying value of accounts receivable is reduced by an allowance that reflects the Company’s best estimate of the
amounts that will not be collected. An allowance for credit losses is recorded in the period when a loss is probable based on an assessment
of specific evidence indicating collection is unlikely, historical bad debt rates, accounts aging, financial conditions of the customer
and industry trends. Starting from April 1, 2023, the Company adopted ASU No.2016-13 “Financial Instruments – Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASC Topic 326”). The Company used a modified
retrospective approach, and the adoption does not have an impact on our consolidated financial statements. Management also periodically
evaluates individual customer’s financial condition, credit history, and the current economic conditions to make adjustments in
the allowance when it is considered necessary. Account balances are charged off against the allowance after all means of collection have
been exhausted and the potential for recovery is considered remote. The Company’s management continues to evaluate the reasonableness
of the valuation allowance policy and update it if necessary. As of March 31, 2024 and 2023, the Company record allowance for credit
losses of $1,545 and $0 against accounts receivable, respectively.
 
(k)
Finance lease receivables
 
Finance
lease receivables, which result from sales-type leases, are measured at discounted present value of (i) future minimum lease payments,
(ii) any residual value not subject to a bargain purchase option as finance lease receivables on its balance sheet and (iii) accrued
interest on the balance of the finance lease receivables based on the interest rate inherent in the applicable lease over the term of
the lease. Management also periodically evaluates individual customer’s financial condition, credit history and the current economic
conditions to make adjustments in the allowance for credit losses when necessary. Finance lease receivables is charged off against the
allowance for credit losses after all means of collection have been exhausted and the potential for recovery is considered remote. As
of March 31, 2024 and 2023, the Company determined no allowance for credit losses was necessary for finance lease receivables.
 
As
of March 31, 2024 and 2023, finance lease receivables consisted of the following:
 


  
March 31,  
March 31, 

  
2024  
2023 

  
   
  

Minimum lease payments receivable 
$354,617  
$297,960 

Less: Unearned interest 
 (117,927) 
 (80,713)

Financing
    lease receivables 
$236,690  
$217,247 

Finance lease receivables, current  
$144,166  
$146,114 

Finance lease receivables, non-current  
$92,524  
$71,133 

 

Future
scheduled minimum lease payments for investments in sales-type leases as of March 31, 2024 are as follows:
 


  
Minimum
     future 

  
payments
     receivable 

Twelve months ending March 31, 2025 
$206,894 

Twelve months ending March 31, 2026 
 132,805 

Twelve months ending March 31, 2027 
 14,918 

Total 
$354,617 
 


F-14
 

 
SENMIAO
TECHNOLOGY LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
(l)
Property and equipment, net
 
Property
and equipment primarily consist of automobiles, leasehold improvements, computers and other equipment, which are stated at cost less
accumulated depreciation less any provision required for impairment in value. Depreciation is computed using the straight-line method
with no residual value based on the estimated useful life. The useful life of property and equipment is summarized as follows:
 


Categories
 
Useful
    life

Leasehold improvements
 
Shorter of the remaining lease terms or estimated useful lives

Computer equipment
 
2 - 5 years

Office equipment, fixture
    and furniture
 
3 - 5 years

Automobiles
 
3 - 5 years

 
The
Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the future net undiscounted cash flows
that the asset is expected to generate. If such asset is considered to be impaired, the impairment recognized is the amount by which
the carrying amount of the asset, if any, exceeds its fair value determined using a discounted cash flow model. For the years ended March
31, 2024 and 2023, the Company did not recognize impairment for property and equipment.
 
Costs
of repairs and maintenance are expensed as incurred and asset improvements are capitalized. The cost and related accumulated depreciation
of assets disposed of or retired are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statements
of operations and comprehensive loss.
 
(m) Intangible
assets, net
 
Purchased
intangible assets are recognized and measured at fair value upon acquisition. Separately identifiable intangible assets that have determinable
lives continue to be amortized over their estimated useful lives using the straight-line method as follows:
 


Categories
 
Useful
    life

Software
 
5-10 years

Online ride-hailing platform
    operating license
 
2-10 years

 
Separately
identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future
cash flows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss for identifiable intangible
assets is based on the amount by which the carrying amount of the assets exceeds the fair value of the assets. For the years ended March
31, 2024 and 2023, there was no impairment of intangible assets.
 
(n)
Loss per share
 
Basic
loss per share is computed by dividing net loss attributable to stockholders by the weighted average number of outstanding shares of
common stock, adjusted for outstanding shares of common stock that are subject to repurchase.
 
For
the calculation of diluted loss per share, net loss attributable to stockholders for basic loss per share is adjusted by the effect of
dilutive securities, including share-based awards, under the treasury stock method and convertible securities under the if-converted
method. Potentially dilutive securities, of which the amounts are insignificant, have been excluded from the computation of diluted net
loss per share if their inclusion is anti-dilutive.
 
As
of March 31, 2024, the Company’s dilutive securities from the outstanding series A convertible preferred stock are convertible
into 495,706 shares of common stock. This amount is not included in the computation of dilutive loss per share because their impact
is anti-dilutive. 

F-15
 

 
SENMIAO
TECHNOLOGY LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 

(o)
Mezzanine Equity (redeemable)
 
The Company
evaluates its convertible preferred stock in accordance with ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic
470-20), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity’s Own Equity, to determine if its convertible preferred stock should be treated as a liability or an
equity. As a result, the Company determined that the convertible preferred stock should be treated as an equity as it did not meet the
definition of liability instrument. In accordance with ASC 480-10-S99, the convertible preferred stock should be classified as a mezzanine
equity, since it contained a change of control redemption right feature which is not solely within the control of the Company. The Company
believes the future event of change of control is not probable as of March 31, 2024; therefore, the convertible preferred stock has not
been re-measured to its redemption value. Subsequently, the Company adjust the initial carrying amount of the convertible preferred stock
by the at redemption value method. As of March 31, 2024, there was no change to the initial carrying amount of the convertible preferred
stock.
 
(p)
Derivative liabilities
 
A
contract is designated as an asset or a liability and is carried at fair value on the Company’s balance sheet, with any changes
in fair value recorded in the Company’s results of operations. The Company then determines which options, warrants and embedded
features require liability accounting and records the fair value as a derivative liability. The changes in the values of these instruments
are shown in the consolidated statements of operations and comprehensive loss as “change in fair value of derivative liabilities”.
  
(q)
Revenue recognition
 
The
Company recognized its revenue under Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606).
ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising
from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue
to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled
to receive in exchange for those goods or services recognized as performance obligations are satisfied. It also requires the Company
to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based
on when control of goods and services transfers to a customer.
 
To
achieve that core principle, the Company applies the five steps defined under ASC 606: (i) identify the contract(s) with a customer,
(ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price
to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
 
The
Company accounts for a contract with a customer when the contract is entered into by the parties, the rights of the parties, including
payment terms, are identified, the contract has commercial substance and consideration to collect is substantially probable.
 
Disaggregated
information of revenues by business lines are as follows:
 


  
For the Years
    Ended 

  
March
    31, 

  
2024  
2023 

Automobile Transaction and Related Services 
   
  

- Operating lease revenues from
automobile rentals 
$3,831,037  
$3,453,392 

- Monthly services commissions 
 196,099  
 179,241 

- Financing revenues 
 57,677  
 41,738 

- Service fees from NEVs leasing 
 45,231  
 350,510 

- Service fees from automobile purchase
    services 
 36,637  
 33,585 

- Service fees from management and guarantee
    services 
 16,246  
 40,158 

- Revenues from sales of automobiles 
 8,822  
 243,065 

- Other service fees 
 128,282  
 30,880 

Total
    revenues from Automobile Transaction and Related Services 
 4,320,031  
 4,372,569 

Online
    Ride-hailing Platform Services 
 2,494,397  
 3,709,945 

Total
    Revenues from Operations 
$6,814,428  
$8,082,514 

 
 Automobile
transaction and related services
 
Operating
lease revenues from automobile rentals –The Company generates revenue from sub-leasing automobiles to some online ride-hailing
drivers or third-parties and leasing its own automobiles. The Company recognizes revenue wherein an automobile is transferred to the
lessees and the lessees has the ability to control the asset, is accounted for under ASC Topic 842. Rental transactions are satisfied
over the rental period and is recognized over time. As the operating lease revenue are variable in nature which is based on online ride-hailing
drivers or third-parties’ performance for a certain period, the Company recognized the revenue from operating lease by using the
output method based on periodic settlement between the Company and the online ride-hailing drivers or third-parties when such revenue
is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Rental periods are short term
in nature, generally are twelve months or less. 


F-16
 

 
SENMIAO
TECHNOLOGY LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
Monthly
services commissions – Commissions from the services generated from the management and related services provided to Partner Platforms
and other companies, which are settled on a monthly basis. The Company recognizes revenues at a point in time when performance obligations
are completed and the commission amount is confirmed by the Partner Platforms and other companies, based on their evaluations on the services
provided by the Company.
 
Financing
revenues – Interest income from the lease arising from the Company’s sales-type leases and bundled lease arrangements are
recognized as financing revenues over the lease term based on the effective rate of interest in the lease. 
 
Service
fees from NEVs leasing and automobile purchase services - Services fees from NEVs leasing and automobile purchase services are paid by
some lessees who rent new energy electric vehicles from the Company or automobile purchasers for a series of the services provided to
them throughout the purchase process such as credit assessment, installment of GPS devices, ride-hailing driver qualification and other
administrative procedures. The amount of services fees for NEVs leasing is based on the product solutions while the fees for purchase
is based on the sales price of the automobiles and relevant services provided. The Company recognizes revenue at a point in time when
above mentioned services are completed, and corresponding an automobile is delivered to the lessee or purchaser. Accounts receivable
related to the revenue from NEVs leasing and automobile purchase services is collected upon the automobiles are delivered to lessees
or purchaser.
 
Service
fees from automobile management and guarantee services – Over 95% of the Company’s customers are online ride-hailing
drivers. Some of the drivers sign affiliation agreements with the Company, pursuant to which the Company provides them with management
and guarantee services during the affiliation period. Service fees for management and guarantee services are paid by such automobile
purchasers on a monthly basis for the management and guarantee services provided during the affiliation period. The Company recognizes
revenue over the affiliation period when performance obligations are completed.
 
Sales
of automobiles – The Company generated revenue from sales of automobiles to the customers of Hunan Ruixi. The control over the
automobile is transferred to the purchaser along with the delivery of automobiles. The amount of the revenue is based on the sale price
agreed by Hunan Ruixi and the customers. The Company recognizes revenues when an automobile is delivered and control is transferred to
the purchaser at a point in time. Accounts receivable related to the revenue are being collected within 12 months.
 
Other service
fees – The Company generated other revenues such as miscellaneous service fees charged to its customers for some supporting services
provided to online ride-hailing drivers. The Company recognizes revenues at a point in time when performance obligations are completed
and the collectability is probable from the customers.
 
Leases
- Lessor
 
The
Company recognized revenue as lessor in accordance with ASC 842. The two primary accounting provisions the Company uses to classify transactions
as sales-type or operating leases are: (i) a review of the lease term to determine if it is for the major part of the economic life of
the underlying equipment (defined as greater than 75)%; and (ii) a review of the present value of the lease payments to determine
if they are equal to or greater than substantially all of the fair market value of the equipment at the inception of the lease (defined
as greater than 90%). Automobiles included in arrangements meeting these conditions are accounted for as sales-type leases. Interest
income from the lease is recognized in financing revenues over the lease term. Automobile included in arrangements that do not meet these
conditions are accounted for as operating leases and revenue is recognized over the term of the lease.
 
The
Company excludes from the measurement of its lease revenues any tax assessed by a governmental authority that is both imposed on and
concurrent with a specific revenue-producing transaction and collected from a customer.
 
The
Company considers the economic life of most of the automobiles to be three to five years, since this represents the
most common long-term lease term for its automobiles and the automobiles will be used for online ride-hailing services. The Company believes
three to five years is representative of the period during which an automobile is expected to be economically usable, with normal service,
for the purpose for which it is intended.
 
The
Company’s lease pricing interest rates, which are used in determining customer payments in a bundled lease arrangement, are developed
based upon the local prevailing rates in the marketplace where its customer will be able to obtain an automobile loan under similar terms
from the bank. The Company reassesses its pricing interest rates quarterly based on changes in the local prevailing rates in the marketplace.
As of March 31, 2024, the Company’s pricing interest rate was 6.0% per annum.  


F-17
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Online ride-hailing platform
services
 
The Company
generates revenue from providing services to online ride-hailing drivers (“Drivers”) to assist them in providing transportation
services to riders (“Riders”) looking for taxi/ride-hailing services. The Company earns commissions for each completed ride
in an amount equal to the difference between an upfront quoted fare and the amount earned by a Driver based on actual time and distance
for the ride charged to the Rider. As a result, the Company bears a single performance obligation in the transaction of connecting Drivers
with Riders to facilitate the completion of a successful transportation service for Riders. The Company recognizes revenue upon completion
of a ride as the single performance obligation is satisfied and the Company has the right to receive payment for the services rendered
upon the completion of the ride. The Company evaluates the presentation of revenue on a gross or net basis based on whether it controls
the service provided to the Rider and is the principal (i.e., “gross”), or it arranges for other parties to provide the service
to the Rider and is an agent (i.e., “net”). Since the Company is not primarily responsible for ride-hailing services provided
to Riders, it does not have discretion in establishing the price of the online ride-hailing service and inventory risk related to the
services as the Company earns commissions for each completed order as the difference between an upfront quote fare and the amount earned
by a driver based on actual time and distance for ride charged to the rider. Thus, the Company recognizes revenue at a net basis. Incentives
paid to Drivers are similar to retrospective volume-based rebates and represent variable consideration that is typically settled weekly
or monthly. The Company recorded it as a reduction to revenue by the amount of the incentives to be paid upon completion of the performance
criteria.
 
(r)
Income taxes
 
Deferred income tax liabilities and assets are
recognized for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis
of assets and liabilities. Provisions or benefits for income taxes consists of tax estimated from taxable income plus or minus deferred
tax expenses (benefits) if applicable.
 
Deferred tax is calculated using the balance sheet
liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in
the consolidated financial statements and the corresponding tax basis. In principle, deferred tax liabilities are recognized for all taxable
temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable income will be utilized with
prior net operating loss carried forwards using tax rates that are expected to apply to the period when the asset is realized or the liability
is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly
to equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be utilized. Current income taxes are provided for in accordance with the laws
of the relevant tax authorities.
 An uncertain tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized
on examination. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period
incurred. The Company did not have any significant unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties
associated with unrecognized tax benefit as of March 31, 2024 and 2023. As of March 31, 2024, the calendar years ended December 31, 2018
through 2023 for the Company’s PRC entities remain open for statutory examination by PRC tax authorities. The Company presents deferred
tax assets and liabilities as non-current in the balance sheet based on an analysis of each taxpaying component within a jurisdiction.
Meanwhile, the Internal Revenue Service (“IRS”) in the U.S. can include returns filed within the last three years in an audit
unless a substantial error is found in which case, IRS may extend the period to six years. The Company is not currently under examination
by any income tax authority, nor has it been notified of an impending examination. Since these net operating losses may be utilized in
future periods, they remain subject to examination. As of March 31, 2024, the Company was not aware of any pending income tax examinations
by U.S.

 
(s)
Comprehensive loss
 
Comprehensive loss includes net loss and foreign
currency adjustments. Comprehensive loss is reported in the consolidated statements of operations and comprehensive loss. Accumulated
other comprehensive loss, as presented on the consolidated balance sheets are the cumulative foreign currency translation adjustments. 



F-18
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(t)
Share-based awards
 
Share-based awards granted to the Company’s
employees are measured at fair value on grant date and share-based compensation expense is recognized (i) immediately at the grant date
if no vesting conditions are required, or (ii) using the straight-line basis, net of estimated forfeitures, over the requisite service
period. The fair value of restricted shares is determined with reference to the fair value of the underlying shares.
 
At each date of measurement, the Company reviews internal and external
sources of information to assist in the estimation of various attributes to determine the fair value of the share-based awards granted
by the Company, including but not limited to the fair value of the underlying shares, expected life, expected volatility and expected
forfeiture rates. The Company is required to consider many factors and make certain assumptions during this assessment. If any of the
assumptions used to determine the fair value of the share-based awards changes significantly, share-based compensation expense may differ
materially in the future from that recorded in the current reporting period.
  
(u)
Leases – lessee
 
The Company accounts for leases in accordance
with ASC 842. The Company enters into certain agreements as a lessee to lease automobiles and to conduct its automobiles rental operations.
If any of the following criteria are met, the Company classifies the lease as a direct financing or sales-type lease (as a lessee):
 

●The lease transfers ownership of the underlying asset to
the lessee by the end of the lease term;

 

●The lease grants the lessee an option to purchase the underlying
asset that the Company is reasonably certain to exercise;

 

●The lease term is for 75% or more of the remaining economic
life of the underlying asset, unless the commencement date falls within the last 25% of the economic life of the underlying asset;

 

●The present value of the sum of the lease payments equals
or exceeds 90% of the fair value of the underlying asset; or

  

●The underlying asset is of such a specialized nature that
it is expected to have no alternative use to the lessor at the end of the lease term.

 
Leases that do not meet any of the above criteria
are accounted for as operating leases.
  
The Company combines lease and non-lease components
in its contracts under Topic 842, when permissible.
 
Finance and operating lease ROU assets and lease
liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Since the implicit
rate for the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate based on the information
available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest
that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic
environment and over a similar term. 



F-19
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Lease terms used to calculate the present value
of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable
certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating
lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception,
therefore operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Its leases generally
do not provide a residual guarantee. The finance or operating lease ROU asset also excludes lease incentives. Lease expense is recognized
on a straight-line basis over the lease term for operating lease. Meanwhile, the Company recognizes the finance leases ROU assets and
interest on an amortized cost basis. The amortization of finance ROU assets is recognized on a straight-line basis as amortization expense,
while the lease liability is increased to reflect interest on the liability and decreased to reflect the lease payments made during the
period. Interest expense on the lease liability is determined each period during the lease term as the amount that results in a constant
periodic interest rate of the automobile loans on the remaining balance of the liability.
 
The Company reviews the impairment of its ROU
assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived
assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment
of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax
cash flows of the related operations. The Company has elected to include the carrying amount of finance and operating lease liabilities
in any tested asset group and include the associated lease payments in the undiscounted future pre-tax cash flows. For the years ended
March 31, 2024 and 2023, the Company did not recognize impairment loss on its finance lease ROU assets.
 
 (v) Significant risks and uncertainties
 

1)Credit risk

 

a.Assets
that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents. The
maximum exposure of these assets to credit risk is their carrying amounts as of the balance sheet dates. As of March 31, 2024 and 2023,
approximately $21,000 and $79,000, respectively, were deposited with a bank in the United States which is insured by the U.S. government
up to $250,000. As of March 31, 2024 and 2023, approximately $719,000 and $1,190,000, respectively, were deposited in financial
institutions located in mainland China, which were insured by the government authority. Under the Deposit Insurance System in China,
an enterprise’s deposits at one bank are insured for a maximum of approximately $69,000 (RMB500,000). To limit exposure to
credit risk relating to deposits, the Company primarily places cash deposits with large financial institutions in China which management
believes are of high credit quality.

 
The
Company’s operations are carried out entirely in mainland China. Accordingly, the Company’s business, financial condition
and results of operations may be influenced by the social, political, economic and legal environments in the PRC as well as by the general
state of the PRC economy. In addition, the Company’s business may be influenced by changes in PRC government laws, rules and policies
with respect to, among other matters, anti-inflationary measures, currency conversion and remittance of currency outside of China, rates
and methods of taxation and other factors.
 

b.In
measuring the credit risk of accounts receivable due from the automobile purchasers (the “customers”), the Company mainly
reflects the “probability of default” by the customer on its contractual obligations and considers the current financial
position of the customer and the risk exposures to the customer and its likely future development.

 
Historically,
most of the automobile purchasers would pay the Company their previously defaulted amounts within one to three months. As a result, the
Company would provide full provisions on accounts receivable if the customers default on repayments for over three months. As of March
31, 2024 and 2023, the Company record allowance for credit losses of $1,545 and $0 against accounts receivable, respectively.
 

2)Foreign
currency risk

 
As
of March 31, 2024 and 2023, substantially all of the Company’s operating activities and major assets and liabilities,
except for the cash deposit of approximately $21,000 and $79,000, respectively, in U.S. dollars, are denominated in RMB, which
are not freely convertible into foreign currencies. All foreign exchange transactions take place through either the People’s
Bank of China (the “PBOC”) or other authorized financial institutions at exchange rates quoted by PBOC. Approval of
foreign currency payments by the PBOC or other regulatory institutions requires a payment application together with invoices and
signed contracts. The value of RMB is subject to change in central government policies and international economic and political
developments affecting supply and demand in the China Foreign Exchange Trading System market. When there is a significant change in
value of RMB, the gains and losses resulting from translation of financial statements of a foreign subsidiary will be
significantly affected. RMB depreciated from 6.87 RMB into US$1.00 on March 31, 2023 to 7.22 RMB into
US$1.00 on March 31, 2024. 


F-20
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(w)
Recent accounting pronouncements not yet adopted
  
In October
2023, the FASB issued ASU 2023-06, Disclosure Improvements — codification amendments in response to SEC’s disclosure Update
and Simplification initiative which amend the disclosure or presentation requirements of codification subtopic 230-10 Statement of
Cash Flows—Overall, 250-10 Accounting Changes and Error Corrections— Overall, 260-10 Earnings Per Share— Overall, 270-10
Interim Reporting— Overall, 440-10 Commitments—Overall, 470-10 Debt—Overall, 505-10 Equity—Overall, 815-10 Derivatives
and Hedging—Overall, 860-30 Transfers and Servicing—Secured Borrowing and Collateral, 932-235 Extractive Activities—
Oil and Gas—Notes to Financial Statements, 946-20 Financial Services— Investment Companies— Investment Company Activities,
and 974-10 Real Estate—Real Estate Investment Trusts—Overall. The amendments represent changes to clarify or improve
disclosure and presentation requirements of above subtopics. Many of the amendments allow users to more easily compare entities subject
to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the
amendments align the requirements in the Codification with the SEC’s regulations. For entities subject to existing SEC disclosure
requirements or those that must provide financial statements to the SEC for securities purposes without contractual transfer restrictions,
the effective date aligns with the date when the SEC removes the related disclosure from Regulation S-X or Regulation S-K. Early adoption
is not allowed. For all other entities, the amendments will be effective two years later from the date of the SEC’s removal.
The Company is currently evaluating the impact of the update on the Company’s consolidated financial statements and related disclosures.
 
In November
2023, the FASB issued ASU 2023-07, which is an update to Topic 280, Segment Reporting. The amendments in this Update improve
financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities
to enable investors to develop more decision-useful financial analyses. The amendments in this update: (1) require that a public
entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision
maker (CODM) and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense
principle”), (2) Require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable
segment and a description of its composition. The other segment items category is the difference between segment revenue less the segment
expenses disclosed under the significant expense principle and each reported measure of segment profit or loss, (3) Require that a public
entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 in
interim periods, and (4) Clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment
performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit.
However, at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should
be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity’s
consolidated financial statements. In other words, in addition to the measure that is most consistent with the measurement principles
under generally accepted accounting principles (GAAP), a public entity is not precluded from reporting additional measures of a segment’s
profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources, (5) Require that a public
entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or
loss in assessing segment performance and deciding how to allocate resources, and (6) Require that a public entity that has a single reportable
segment provide all the disclosures required by the amendments in this Update and all existing segment disclosures in Topic 280. The amendments
in this Update also do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies
the quantitative thresholds to determine its reportable segments. The amendments in this Update are effective for fiscal years beginning
after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public
entity should apply the amendments in this Update retrospectively to all prior periods presented in the financial statements. Upon transition,
the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories
identified and disclosed in the period of adoption. The Company is currently evaluating the impact of the update on the Company’s
consolidated financial statements and related disclosures.
 
In December 2023, the FASB
issued ASU 2023-09, which is an update to Topic 740, Income Taxes. The amendments in this update related to the rate reconciliation
and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) consistent categories and greater
disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The amendments allow
investors to better assess, in their capital allocation decisions, how an entity’s worldwide operations and related tax risks and
tax planning and operational opportunities affect its income tax rate and prospects for future cash flows. The other amendments in this
Update improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (or loss) and income tax
expense (or benefit) to be consistent with U.S. Securities and Exchange Commission (SEC) Regulation S-X 210.4-08(h), Rules of General
Application—General Notes to Financial Statements: Income Tax Expense, and (2) removing disclosures that no longer are considered
cost beneficial or relevant. For public business entities, the amendments in this Update are effective for annual periods beginning after
December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December
15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The
amendments in this Update should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating
the impact of the update on Company’s consolidated financial statements and related disclosures.  


F-21
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(x)
Recently adopted accounting pronouncements
 
The Company
considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting
standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company
meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting
standards, which delays the adoption of these accounting standards until they would apply to private companies.
 
In June
2016, the FASB issued new accounting guidance ASU 2016-13 for recognition of credit losses on financial instruments, which is effective
January 1, 2020, with early adoption permitted on January 1, 2019. The guidance introduces a new credit reserving model known as the Current
Expected Credit Loss (“CECL”) model, which is based on expected losses, and differs significantly from the incurred loss approach
used today. The CECL model requires measurement of expected credit losses not only based on historical experience and current conditions,
but also by including reasonable and supportable forecasts incorporating forward-looking information and will likely result in earlier
recognition of credit reserves. In November 2019, the FASB issued ASU No. 2019-10, which is to update the effective date of ASU No. 2016-13
for private companies, not-for-profit organizations and certain smaller reporting companies applying for credit losses standard. The new
effective date for these preparers is for fiscal years beginning after December 15, 2022, including interim periods within those fiscal
years. The Company has adopted this update on April 1, 2023, and the adoption does not have material impact on Company’s consolidated
financial statements and related disclosures.
 
CECL adoption
will have broad impact on the financial statements of financial services firms, which will affect key profitability and solvency measures.
Some of the more notable expected changes include:
 

-Higher
allowance on financial guarantee reserve and finance lease receivable levels and related deferred tax assets. While different asset types
will be impacted differently, the expectation is that reserve levels will generally increase across the board for all financial firms.

 

-Increased
reserve levels may lead to a reduction in capital levels.

 

-As
a result of higher reserving levels, the expectation is that CECL will reduce cyclicality in financial firms’ results, as higher
reserving in “good times” will mean that less dramatic reserve increases will be loan related income (which will continue
to be recognized on a periodic basis based on the effective interest method) and the related credit losses (which will be recognized
up front at origination). This will make periods of loan expansion seem less profitable due to the immediate recognition of expected
credit losses. Periods of stable or declining loan levels will look comparatively profitable as the income trickles in for loans, where
losses had been previously recognized.

 
Although the Company has automobile
financing business, the Company reserves the allowance for doubtful account such as accounts receivable balance based on historical collection
rate, current economic environment, and credit worthy of specific customers, along with individual assessment on specific accounts. As
these approvals are aligned with the CECL model, the adoption of CECL model does not have material impact on Company’s consolidated
financial statements and related disclosures. Further, The Company does not believe other recently issued but not yet effective accounting
standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash
flows of the Company.
 
In March 2023, the FASB issued
new accounting guidance, ASU 2023-01, for leasehold improvements associated with common control leases, which is effective for fiscal
years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim
and annual financial statements that have not yet been made available for issuance. The new guidance introduced two issues: terms and
conditions to be considered with leases between related parties under common control and accounting for leasehold improvements. The goals
for the new issues are to reduce the cost associated with implementing and applying Topic 842 and to promote diversity in practice by
entities within the scope when applying lease accounting requirements. ASU 2023-01 is effective for the Company for annual and interim
reporting periods beginning April 1, 2024. The Company has adopted this update on April 1, 2024, and does not anticipate such adoption
to have material impact on Company’s consolidated financial statements and related disclosures for the fiscal year ending March
31, 2025.
 

F-22
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
4. DISCONTINUED
OPERATIONS
 
Discontinued
operations- Online P2P lending services
 
On October
17, 2019, the Board approved the plan under which the Company has discontinued and is winding down its online P2P lending services business
(the “Plan”). The Company determined that the operation of its online P2P lending services business was not viable in light
of the tightened regulations on online peer-to-peer lending in China generally and the unofficial request from local regulator to reduce
the Company’s online peer-to-peer lending transaction volume on a monthly basis. The Company also determined that the discontinuation
of its online P2P lending services business would allow the Company to focus its resources on its automobile financing facilitation and
transaction business. In connection with the Plan, the Company ceased facilitation of loan transactions on its online lending platform
and assumed all the outstanding loans from investors on the platform. The decision and action taken by the Company of discontinuing the
online lending services business represented a major shift that had a major effect on the Company’s operations and financial results,
which triggers discontinued operations accounting in accordance with ASC 205-20-45.
 
The fair
value of discontinued operations, determined as of October 17, 2019, includes estimated consideration expected to be received, less costs
to sell. After consideration of the determination of fair value of the discontinued operations including the assumption of all the outstanding
loans from investors on the platform, $143,668 of accounts receivable, $3,760,599 of other receivables, and $143,943 of
prepayments for impaired intangible assets were indicated as of the date the Company’s Board of Directors approved the Plan on October
17, 2019, and the Company recognized $4,048,210 provision for doubtful accounts as of December 31, 2019 related to the Company’s
online lending services business, while the Company did not recognize any additional provision for doubtful accounts for the year ended
March 31, 2024.
 
Carrying
amounts of major classes of liabilities was included as part of discontinued operations of Online P2P lending services, whose change was
due to the effect of exchange rate changes as of March 31, 2024 and 2023:
 


  
March 31,  
March 31, 

  
2024  
2023 

Current liabilities 
   
  

Accrued expenses and other liabilities 
$464,000  
$487,829 

  
    
   

5. ACCOUNTS
RECEIVABLE, NET
 
Accounts
receivable include online ride-hailing services fees due from online ride-hailing drivers and rental receivables due from operating lessees.
It also includes a portion of bundled lease arrangements on fixed minimum monthly payments to be paid by the automobile purchasers arising
from automobile sales and services fees, net of unearned interest income, discounted using the Company’s lease pricing interest
rates. 
 
As of March
31, 2024 and 2023, accounts receivable were comprised of the following:
 


  
March 31,  
March 31, 

  
2024  
2023 

Receivables of online ride hailing fees from online ride-hailing drivers 
$14,130  
$51,290 

Receivables of operating lease 
 18,531  
 31,039 

Receivables of automobile sales due from automobile purchasers 
 2,897  
 76,106 

Less: Allowance for credit losses 
 (1,545) 
 — 

Accounts receivable, net 
$34,013  
$158,435 

 
Movement of allowance for credit
losses for the years ended March 31, 2024 and 2023 are as follows:
 


  
March 31,  
March 31, 

  
2024  
2023 

Beginning balance 
$—  
$112,905 

Addition 
 1,557  
 3,394 

Write off 
 —  
 (107,868)

Translation adjustment 
 (12) 
 (8,431)

Ending balance 
$1,545  
$— 

 

F-23
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
6. INVENTORIES
 


  
March 31,  
March 31, 

  
2024  
2023 

Automobiles (i) 
$—  
$6,678 

  
    
   


(i)As
of March 31, 2023, the Company owned an automobile with a total value of $6,678, net of impairment, for sale or sales-type leases.

 
For the
years ended March 31, 2024 and 2023, the Company recognized impairments of $0 and $3,085, respectively for certain automobiles
for sale.
 
7. PREPAYMENTS, OTHER RECEIVABLES
AND OTHER CURRENT ASSETS, NET
 
As of March
31, 2024 and 2023, the prepayments, other receivables and other current assets, net were comprised of the following:
 


  
March 31,  
March 31, 

  
2024  
2023 

Prepaid expenses (i) 
$457,302  
$334,297 

Deposits (ii) 
 381,651  
 679,794 

Receivables from aggregation platforms (iii) 
 145,751  
 271,791 

Value added tax (“VAT”) recoverable (iv) 
 27,443  
 86,051 

Due from automobile purchasers, net (v) 
 2,633  
 45,489 

Employee advances 
 142  
 11,482 

Others 
 28,365  
 9,339 

Less: Allowance for credit losses 
 (20,474) 
 — 

Total prepayments, other receivables and other current assets, net 
$1,022,813  
$1,438,243 

 
Movement of allowance for credit
losses for the years ended March 31, 2024 and 2023 are as follows:
 


  
March 31,  
March 31, 

  
2024  
2023 

Beginning balance 
$—  
$     — 

Addition 
 20,626  
 — 

Translation adjustment 
 (152) 
 — 

Ending balance 
$20,474  
$— 

 

(i)Prepaid
expense

 
The
balance of prepaid expense represented automobile purchase prepayments, automobile liability insurance premium for automobiles for operating
lease and other miscellaneous expense such as office lease, office remodel expense, etc. that will expire within one year.
 

(ii)Deposits

 
The balance of deposits mainly
represented the security deposit made by the Company to various automobile leasing companies, financial institutions and Didi Chuxing
Technology Co., Ltd., who runs an online ride-hailing platform. As of March 31, 2024, the
allowance for credit losses of $17,841 was recorded against the security deposits not returned
for more than one year after the end of the cooperation.
 

(iii)Receivables
from aggregation platforms

 
The
balance of receivables from aggregation platforms represented the amount due from the collaborated aggregation platforms based on the
confirmed billings, which will be disbursed to the drivers who completed their rides through the Company’s online ride-hailing
platform. 


F-24
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 

(iv)Value
added tax (“VAT”) recoverable

 
The
balance represented the amount of VAT, which resulted from historical purchasing activities and could be further used for deducting future
VAT in PRC.
 

(v)Due
from automobile purchasers, net

 
The balance due from automobile
purchasers represented the payments of automobiles and related insurances and taxes made on behalf of the automobile purchasers. The balance
is expected to be collected from the automobile purchasers in installments. As of March 31, 2024, the allowance for credit losses recorded
against receivables due from automobile purchasers was $2,633. During the year ended March 31, 2024, the Company recorded provision for
credit losses of $2,652 against the balance from an automobile purchaser.
 
8. PROPERTY
AND EQUIPMENT, NET
 
Property
and equipment consist of the following:
 


  
March 31,  
March 31, 

  
2024  
2023 

Leasehold improvements 
$174,266  
$183,216 

Computer equipment 
 32,494  
 37,932 

Office equipment, fixtures and furniture 
 77,898  
 78,372 

Automobiles 
 4,707,663  
 4,679,927 

Subtotal 
 4,992,321  
 4,979,447 

Less: accumulated depreciation and amortization 
 (2,315,797) 
 (1,635,990)

Total property and equipment, net 
$2,676,524  
$3,343,457 

 
Depreciation
expense for the years ended March 31, 2024 and 2023 were amounted to $933,395 and $1,095,518, respectively.
 
9. INTANGIBLE ASSETS, NET
 
Intangible assets consisted of
the following:
 


  
March 31,  
March 31, 

  
2024  
2023 

Software 
$791,262  
$793,381 

Online ride-hailing platform operating licenses 
 419,988  
 441,557 

Subtotal 
 1,211,250  
 1,234,938 

Less: accumulated amortization 
 (620,523) 
 (460,614)

Total intangible assets, net 
$590,727  
$774,324 

 
Amortization
expense for the years ended March 31, 2024 and 2023 were amounted to $172,135 and $184,215, respectively. 
 
The following
table sets forth the Company’s amortization expense for the next five years ending:
 


  
Amortization expenses 

Twelve months ending March 31, 2025  
$165,089 

Twelve months ending March 31, 2026  
 112,161 

Twelve months ending March 31, 2027  
 81,587 

Twelve months ending March 31, 2028  
 77,908 

Twelve months ending March 31, 2029  
 77,389 

Thereafter  
 76,593 

Total  
$590,727 

 

F-25
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
10. OTHER NON-CURRENT ASSETS
 


  
March 31,  
March 31, 

  
2024  
2023 

Prepayments of automobiles purchased (i) 
$639,863  
$716,407 

  
    
   


(i)In
September 2022 and March 2023, the Company entered into two automobile purchase agreements (“Purchase Agreements”) with two
third parties to purchase a total of 150 automobiles which amounted to $2,301,261. As of March 31, 2024, 50 automobiles
have been delivered to the Company and the Company has made prepayments of $639,863 towards the remaining purchase pertaining
to the Purchase Agreements. The Company expects to complete the remaining purchase by March 31, 2025.

 
11. BORROWINGS FROM A FINANCIAL
INSTITUTION
 
        Interest   March 31,   March 31,   Bank name  Maturity date  rate   2024   2023   WeBank*  09/11/2025   12.24%  $213,684   $—   SDIC Taikang Trust Co. Ltd  Fully Repaid on August 31, 2023   13.04%   —    8,813   Total          $213,684   $8,813   Borrowing from a financial institution, current          $142,456   $8,813   Borrowing from a financial institution, non-current          $71,228   $—  
 

*On
September 11, 2023, the Company entered into a loan agreement (the “Loan Agreement”) with WeBank for a total amount of $249,297.
Pursuant to the Loan Agreement, the borrowing bears an interest rate of 12.24% per annum with monthly repayments consist of principal
and interest for two years. As of March 31, 2024, the current portion of the loan principal balance to be repaid within the next twelve
months was amounted to $142,456, while the noncurrent portion of the loan principal to be repaid after March 31, 2025, was amounted to
$71,228.

 
The total
interest expense for the years ended March 31, 2024 and 2023 was $17,630 and $0, respectively. 
 
12. ACCRUED EXPENSES AND OTHER
LIABILITIES
 


  
March 31,  
March 31, 

  
2024  
2023 

Accrued payroll and welfare 
$1,940,549  
$1,636,092 

Payables to drivers from aggregation platforms (i) 
 800,207  
 1,103,892 

Deposits (ii) 
 686,897  
 730,002 

Accrued expenses 
 516,210  
 226,721 

Payables for expenditures on automobile transaction and related services (iii) 
 9,768  
 31,719 

Other taxes payable 
 98,003  
 83,432 

Loan repayments received on behalf of financial institutions(iv) 
 449  
 16,130 

Other payables 
 60,324  
 37,348 

Total accrued expenses and other liabilities 
 4,112,407  
 3,865,336 

Total accrued expenses and other liabilities – discontinued operations 
 (464,000) 
 (487,829)

Total accrued expenses and other liabilities – continuing operations 
$3,648,407  
$3,377,507 

 

(i)Payables
to drivers from aggregation platforms

 
The
balance of payables to drivers from aggregation platforms represented the amount the Company collected on behalf of drivers who completed
their transaction through the Company’s online ride-hailing platform base on the confirmed billings. 


F-26
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
 

(ii)Deposits

 
The
balance of deposits represented the security deposit from operating and finance lease customers to cover lease payment and related automobile
expense in case the customers’ accounts are in default. The balance is refundable at the end of the lease term, after deducting
any missed lease payment and applicable fee.
 

(iii)Payables
for expenditures on automobile transaction and related services

 
The
balance of payables for expenditures on automobile transaction and related services represented the payables balance to the miscellaneous
expenses related to the daily operations of automobiles. 
 

(iv)Loan
repayments received on behalf of financial institutions

 
The
balance of loan repayments received on behalf of financial institutions represented the loan repayments made by the automobile purchasers
to financial institutions through the Company, which has not been paid to the financial institutions.
 
13. EMPLOYEE BENEFIT PLAN
 
The Company
has made employee benefit plan in accordance with relevant PRC regulations, including retirement insurance, unemployment insurance, medical
insurance, housing fund, work injury insurance and maternity insurance.
 
The contributions
made by the Company were $267,962 and $452,796 for the years ended March 31, 2024 and 2023, respectively, from operations of the Company.

 
As of March
31, 2024 and 2023, the Company did not make adequate employee benefit contributions in the amount of $1,137,887 and $1,086,526, respectively.
 
14. EQUITY
 
Warrants
 
IPO Warrants
 
The registration
statement relating to the Company’s initial public offering also included the underwriters’ common stock purchase warrants
to purchase 33,794 (337,940 pre reverse split) shares of common stock (“IPO Underwriter’s Warrants”).
Each five-year warrant entitles warrant holder to purchase one share of the Company’s common stock at the price of $48.0 ($4.80 before
reverse split) per share and is not exercisable for a period of 180 days from March 16, 2018. As of March 31, 2024,
the remaining 3,794 warrants of the Company’s initial public offering has been forfeited due to expiration.
  
Warrants
in Offerings
 
The Company
adopted the provisions of ASC 815 on determining what types of instruments or embedded features in an instrument held by a reporting entity
can be considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in ASC 815. Warrants
issued in connection with the direct equity offering with exercise prices denominated in US dollars are no longer considered indexed to
the Company’s stock, as their exercise prices are not in the Company’s functional currency (RMB), and therefore no longer
qualify for the scope exception and must be accounted for as a derivative. These warrants are classified as liabilities under the caption
“Derivative liabilities” in the consolidated statements of balance sheets and recorded at estimated fair value at each reporting
date, computed using the Black-Scholes valuation model. Changes in the liability from period to period are recorded in the consolidated
statements of operations and comprehensive loss under the caption “Change in fair value of derivative liabilities.”
 
2019
Registered Direct Offering Warrants
 
As of March 31, 2024 and 2023,
there were 0 and 16,841 2019 registered direct offering warrants outstanding, respectively. During the year ended March 31,
2024, the Company has forfeited the remaining 16,841 2019 registered direct offering warrants as they expired. During the years
ended March 31, 2024 and 2023, the change of fair value was a gain of $6 and $12,432 recognized in the consolidated statements of
operations and comprehensive loss based on the decrease in fair value of the liabilities since March 31, 2022, respectively. As of March
31, 2024 and 2023, the fair value of the derivative instrument totaled $0 and $6, respectively. 


F-27
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
 
August
2020 Underwriters’ Warrants
 
As of March
31, 2024 and 2023, there were 31,808 underwriters’ warrants outstanding. During years ended March 31, 2024 and 2023, the
change of fair value was a gain of $5,231 and $36,131 recognized in the consolidated statements of operations and comprehensive
loss based on the decrease in fair value of the liabilities since March 31, 2022, respectively. As of March 31, 2024 and 2023, the fair
value of the derivative instrument totaled $3,219 and $8,450, respectively. As the 1-for-10 reverse stock split on the Company’s
common stock became effective on April 6, 2022, the exercise price of the August 2020 Underwriters’ Warrants was adjusted to $6.25.
 
February
2021 Registered Direct Offering Warrants
 
As of March
31, 2024 and 2023, there were 53,262 February 2021 registered direct offering warrants outstanding. During the years ended March
31, 2024 and 2023, the change of fair value was a gain of $7,158 and $54,052 recognized in the consolidated statements of operations
and comprehensive loss based on the decrease in fair value of the liabilities since March 31, 2022, respectively. As of March 31, 2024
and 2023, the fair value of the derivative instrument totaled $4,333 and $11,491, respectively. As the 1-for-10 reverse stock split
on the Company’s common stock became effective on April 6, 2022, the exercise prices of the Placement Agent Warrants and the ROFR
Warrants of the February 2021 Registered Direct Offering were adjusted to $13.80 and $17.25, respectively.
 
May 2021
Registered Direct Offering Warrants
 
As of March 31, 2024 and 2023,
there were 594,682 May 2021 registered direct offering warrants outstanding. During the years ended March 31, 2024 and 2023,
the change of fair value was a gain of $87,424 and $662,767 recognized in the consolidated statements of operations and comprehensive
loss based on the decrease in fair value of the liabilities since March 31, 2022. As of March 31, 2024 and 2023, the fair value of the
derivative instrument totaled $86,684 and $174,108, respectively. As the 1-for-10 reverse stock split on the Company’s
common stock became effective on April 6, 2022, the exercise price of the May 2021 Registered Direct Offering warrants was adjusted to
$10.50.
November
2021 Private Placement Warrants
 
Pursuant
to November 2021 Investors Warrants, if at any time and from time to time on or after the issuance date there occurs any stock split,
stock dividend, stock combination recapitalization or other similar transaction involving the Common Stock (“Stock Combination Event”)
and the Event Market Price (which is defined as with respect to any Stock Combination Event date, the quotient determined by dividing
(x) the sum of the VWAP of the Common Stock for each of the five (5) lowest trading days during the twenty (20) consecutive trading day
period ending and including the trading day immediately preceding the sixteenth (16th) trading day after such Stock Combination Event
date, divided by (y) five (5)) is less than the original exercise price of $0.82 then in effect, then on the sixteenth (16th) trading
day immediately following such Stock Combination Event, the exercise price then in effect on such sixteenth (16th) trading day shall be
reduced (but in no event increased) to the event market price. As the 1-for-10 reverse stock split on the Company’s common
stock became effective on April 6, 2022, the exercise price of the November 2021 Investors Warrants was adjusted to $1.13, the Event Market
Price and the total number of shares of the November 2021 Investors Warrants was adjusted to 5,335,763.
 
As
of March 31, 2024 and 2023, there were 5,365,911 November 2021 Private Placement Warrants outstanding. During the years ended March
31, 2024 and 2023, the change of fair value was a gain of $113,130 and $946,507 recognized in the consolidated statements of
operations and comprehensive loss based on the decrease in fair value of the liabilities since insurance. On November 18, 2022, a holder
of November 2021 private placement warrants exercised the warrants on a “cashless” basis. Upon exercise of above-mentioned
warrants, the Company reduced the fair value of the warrants and increased the additional paid in capital by $1,533. As of March 31, 2024
and 2023, the fair value of the derivative instrument totaled $194,597 and $307,727, respectively. 
 
             Weighted   Average              Average   Remaining      Warrants   Warrants   Exercise   Contractual      Outstanding   Exercisable   Price   Life   Balance, March 31, 2022   6,091,298    6,091,298   $2.28    4.32   Exercised   (25,000)   (25,000)   —    —   Balance, March 31, 2023   6,066,298    6,066,298   $2.29    3.56   Forfeited   (20,635)   (20,635)            Balance, March 31, 2024   6,045,663    6,045,663   $2.25    2.55   


F-28
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Restricted Stock Units
 
On October
29, 2020, the Board approved the issuance of an aggregate of 127,273 restricted stock units (“RSUs”) to directors,
officers and certain employees as stock compensation for their services for the years ended March 31, 2022. Total RSUs granted to these
directors, officers and employees were valued at an aggregate fair value of $140,000. These RSUs will vest in four equal quarterly
installments on January 29, 2021, April 29, 2021, July 29, 2021 and October 29, 2021 or in full upon the occurrence of a change in control
of the Company, provided that the director, officer or the employee remains in service through the applicable vesting date. The RSUs
will be settled by the Company’s issuance of shares of common stock in certificated or uncertificated form upon the earlier of
(i) vesting date, (ii) a change in control and (ii) termination of the services of the director, officer or employee due to a “separation
of service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, or the death or disability of
such director, officer or employee. As of the filing date of these consolidated financial statements, all installment of RSUs with an
aggregate of 12,727 was vested and 9,545 was settled by the Company. The Company expects to settle the remaining
vested RSUs by issuance of shares of common stock before December 31, 2024 and account for the vested RSUs as an addition to both expenses
and additional paid-in capital. 
Equity Incentive Plan
 
At the
2018 Annual Meeting of Stockholders of the Company held on November 8, 2018, the Company’s stockholders approved the Company’s
2018 Equity Incentive Plan for employees, officers, directors and consultants of the Company and its affiliates. At the 2022 Annual Meeting
of Stockholders of Company held on March 30, 2023, the Company’s stockholders approved the amendment to the 2018 Equity Incentive
Plan, to increase the number of shares of common stock reserved under the Plan to 1,500,000 shares. A committee consisting
of at least two independent directors would be appointed by the Board or in the absence of such a committee, the board of directors,
will be responsible for the general administration of the Equity Incentive Plan. All awards granted under the Equity Incentive Plan will
be governed by separate award agreements between the Company and the participants. As of March 31, 2024, the Company has granted an aggregate
of 30,379 RSUs (after reverse split), among which, 26,447 RSUs were issued
under the Equity Incentive Plan, 3,182 RSUs were vested but have not been issued while 750 RSUs were forfeited due to two directors
ceased to serve on the board of the Company since November 8, 2018. During the year ended March 31, 2024, no new RSUs were granted. 
1-for-10 shares reverse split
on common stock
 
The Company
considered the above transactions after giving a retroactive effect to a 1-for-10 reverse stock split of its common stock which became
effective on April 6, 2022. The Company believed it is appropriate to reflect the above transactions on a retroactive basis similar to
those after a stock split or dividend pursuant to ASC 260. All shares and per share amounts used herein and in the accompanying consolidated
financial statements have been retroactively stated to reflect the effect of the reverse stock split. Upon execution of the 1-for-10 reverse
stock split, the Company recognized additional 8,402 shares of common stock due to round up issue.
 
Conversion
Price Adjustment for November 2021 Preferred Shares
 
Pursuant
to the Certificate of Designation for the series A convertible preferred stock signed by the Company and certain institutional investors
in November 2021 Private Placement, the initial conversion price of the series A Convertible Preferred Shares was $0.68. If as of the
applicable date the conversion price then in effect is greater than the greater of (1) $0.41 (the “floor Price”) (as
adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) and (2) 85% of the closing
bid price on the applicable date (the “Adjustment Price”), the conversion price shall automatically lower to the Adjustment
Price accordingly. As the 1-for-10 reverse stock split on the Company’s Common Stock became effective on April 6, 2022, the conversion
price of the Preferred Shares was adjusted to $4.1. As of March 31, 2024 and 2023, there were 991 and 1,641 shares
of Series A convertible preferred stock outstanding, respectively, valued at $234,364 and $269,386, recorded as mezzanine equity.
As of March 31, 2024, 4,009 shares of Series A convertible preferred stock were converted into 1,871,125 shares of
the Company’s common stock. Further, on August 9, 2022, the Company and the investors agreed to reduce the conversion price of the
series A Convertible Preferred Shares from $4.10 to $2.00 and to increase the number of the shares of common stock that are
available to be issued upon conversion of the Preferred Shares from 1,092,683 to 2,240,000.
 
Common stock issued for consulting
services
 
In October
2023, the Company entered into three different consulting and services agreements (the “Consulting Agreements”) with three
consultants (the “Consultants”), pursuant to which the Company engaged the Consultant to provide certain merger and acquisition
consulting service, market research and business development advisory services, and financial consulting services, respectively. As compensation
for the services, the Company agreed to issue the Consultants an aggregate of 1,500,000 shares of its common stock, par value
$0.0001. The Company recognized the non-employee share-based payment equity awards by using the grant-date fair values at the time of
signing agreement. On November 7, 2023, the issuance of 1,500,000 shares of the Company’s common stock has been completed
and the Company recorded $444,300 service expense during the years ended March 31, 2024. 


F-29
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Change of ownership interest in a subsidiary
 On
February 11, 2024, The Company and Hunan Ruixi’s two minority shareholders (“Shareholders”) has entered into a share
swap agreement (“Share Swap Agreement”). Pursuant to the Share Swap Agreement, the Company would issue a total of 950,000
shares of its common stock to the above mentioned two Shareholders. In return, each shareholder will transfer a 2.5% equity interest
in Hunan Ruixi to the Company, which increasing the Company’s ownership in Hunan
Ruixi by 5%. As no cash consideration was received, $155,461 which is the difference between the fair value of the consideration
received and the amount by which the noncontrolling interest is adjusted was recognized as an addition in additional paid-in capital
in accordance with ASC 810-10-45-23 “Change in a parent’s ownership interest in a subsidiary”. 
15. INCOME TAXES
 
The United States of America
 
The Company
is incorporated in the State of Nevada in the U.S., and is subject to U.S. federal corporate income taxes with tax rate of 21%. The
State of Nevada does not impose any state corporate income tax.
 
On December
22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax
Act”). The Tax Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and
future foreign earnings are subject to U.S. taxation. The Tax Act also established the Global Intangible Low-Taxed Income (GILTI), a
new inclusion rule affecting non-routine income earned by foreign subsidiaries. For the years ended March 31, 2024 and 2023, the Company’s
foreign subsidiaries in China were operating at loss and as such, did not record a liability for GILTI tax.  
The Company’s
net operating loss for U.S. income taxes from U.S for the years ended March 31, 2024 and 2023 amounted to approximately $1.1 million
and $1.3 million respectively. As of March 31, 2024 and 2023, the Company’s net operating loss carryforward for U.S. income
taxes was approximately $7.6 million and $7.1 million, respectively. The net operating loss carryforward will not expire and
is available to reduce future years’ taxable income but limited to 80% of income until utilized. Management believes that the
utilization of the benefit from this loss appears uncertain due to the Company’s operating history. Accordingly, the Company has
recorded a 100% valuation allowance on the deferred tax asset to reduce the deferred tax assets to zero on the consolidated balance
sheets. Management reviews the valuation allowance periodically and makes changes accordingly.
 
PRC
 
Senmiao
Consulting, Sichuan Senmiao Ronglian Technology Co., Ltd. (“Sichuan Senmiao”), Hunan Ruixi, Sichuan Senmiao Yicheng Assets
Management Co., Ltd. (“Yicheng”), Corenel, Jiekai and XXTX and its subsidiaries are subject to PRC Enterprise Income Tax (“EIT”)
on the taxable income in accordance with the relevant PRC income tax laws. The EIT rate for companies operating in the PRC is 25%.
 
Net income (loss) before income tax by jurisdiction
as follows:
 


  
For the Years Ended 

  
March 31, 

  
2024  
2023 

U.S. 
$(1,436,097) 
$260,851 

PRC 
 (2,807,133) 
 (4,051,544)

Total net loss before income tax 
$(4,243,230) 
$(3,790,693)

 
Significant components of the provision for income
taxes are as follows:
 


  
For the Years Ended 

  
March 31, 

  
2024  
2023 

Current income tax 
$20,206  
$— 

Deferred tax benefit 
 (29,222) 
 — 

Income tax benefit 
$(9,016) 
$— 
 


F-30
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Below is a reconciliation of the statutory
tax rate to the effective tax rate:
 


  
For the Years Ended 

  
March 31, 

  
2024  
2023 

PRC Statutory tax rate* 
 25.0% 
 25.0%

Differential of local statutory tax rate 
 (1.4)% 
 0.3%

Permanent difference of gain from change in fair value of derivative liabilities not taxable in PRC 
 1.1% 
 9.5%

Non-deductible expenses 
 (2.7)% 
 (1.1)%

Valuation allowance on deferred income tax asset 
 (22.2)% 
 (30.7)%

Others 
 0.4% 
 (3.0)%

Effective tax rate 
 0.2% 
 —%

 

*As the Company business operation mainly concentrated PRC,
the Company determined to apply PRC statutory tax rate in reconciliation of the statutory tax rate to the effective tax rate

 
As of March
31, 2024 and 2023, the Company’s PRC entities from continuing operations had net operating loss carryforwards of approximately $9.7 million
and $9.6 million, respectively, which will be available to offset future taxable income. As of March 31, 2024, these carryforwards
will expire from 2025 through 2034, if not used. As of March 31, 2024 and 2023, valuation allowances for deferred tax assets related to
net operating loss carry forward for U.S. income taxes were approximately $1.6 million and $1.5 million, respectively. With
the consideration of the duration of statutory carry forward periods and forecasts of future profitability, it has concluded that it is
more likely than not that all its deferred tax assets generated from the Company would not be utilized in the future. The Company has
provided full allowance of its deferred tax assets. 
 
The tax
effects of temporary differences from continuing operations that give rise to the Company’s deferred tax assets and liabilities
are as follows:
 


  
March 31,  
March 31, 

  
2024  
2023 

Deferred Tax Assets 
    
   

Net operating loss carryforwards in the PRC 
$2,423,561  
$2,403,785 

Net operating loss carryforwards in the U.S. 
 1,588,529  
 1,499,607 

Allowance for credit losses 
 807,974  
 402,599 

Others 
 6,431  
 — 

Less: valuation allowance 
 (4,826,495) 
 (4,305,991)

Deferred tax assets, net 
$—  
$— 

Deferred tax liabilities: 
    
   

Capitalized intangible assets cost 
$11,611  
$42,930 

Deferred tax liabilities, net 
$11,611  
$42,930 

 
As of March 31, 2024 and 2023,
the Company’s PRC entities associated with discontinued operations had net operating loss carryforwards of approximately $0.9 million
and $1.9 million, respectively. Despite the fact that the net operating loss carryforwards arose from the Company discontinued
operation, the Company may still benefit from them as potential deduction against future taxable income. As of March 31, 2024, such net
operating loss from discontinued operations will expire from 2025 through 2026, if not used. The
Company reviews deferred tax assets for a valuation allowance based upon whether it is more likely than not that the deferred tax asset
will not be fully realized. As of March 31, 2024 and 2023, full valuation allowance is provided against the deferred tax assets related
to the Company’s discontinued operations based upon management’s assessment as to their realization.
 
The tax
effects of temporary differences from discontinued operations that give rise to the Company’s deferred tax assets are as follows:
 


  
March 31, 2024  
March 31, 2023 

Net operating loss carry forwards in the PRC 
$228,268  
$479,377 

Less: valuation allowance 
 (228,268) 
 (479,377)

Total 
$—  
$— 

 
Uncertain
tax positions
 
The
Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical
merits, and measure the unrecognized benefits associated with the tax positions. As of March 31, 2024 and 2023, the Company did not have
any unrecognized uncertain tax positions and the Company does not believe that its unrecognized tax benefits will change over the next
twelve months. For the years ended March 31, 2024 and 2023, the Company did not incur any interest and penalties related to potential
underpaid income tax expenses. According to PRC Tax Administration and Collection Law, the statute of limitations is three years if the
underpayment of taxes is due to computational errors made by the taxpayer or withholding agent. The statute of limitations will be extended
five years under special circumstances, which are not clearly defined (but an underpayment of tax liability exceeding RMB0.1 million
is specifically listed as a special circumstance). In the case of a related party transaction, the statute of limitations is ten years.
There is no statute of limitations in the case of tax evasion. 
  

F-31
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
16. CONCENTRATION
 
Major Suppliers
 
For the
year ended March 31, 2024, three suppliers accounted for approximately 20.1%, 13.5%, and 12.1% of the total
costs of revenue from operations of the Company.
 
For the year ended March
31, 2023, two suppliers accounted for approximately 21.2% and 12.4% of the total costs of revenue from continuing
operations of the Company.
 
17. RELATED PARTY TRANSACTIONS
AND BALANCES
 
1. Related Party Balances
 
1) Accounts receivable, a
related party
 
As of March
31, 2024 and 2023, accounts receivable from a related party amounted to $0 and $6,312, respectively, represented balance due from
operating lease revenue recognized from Jinkailong, the Company’s equity investee company.
 
2) Due from related parties
 
As of March
31, 2024 and 2023, balances due from related parties from the Company’s operations were comprised of the following:
 


  
March 31,  
March 31, 

  
2024  
2023 

Total due from related parties 
$6,502,546  
$6,610,156 

Less: Allowance for credit losses 
 (3,099,701) 
 (1,481,036)

Due from related parties, net 
$3,402,845  
$5,129,120 

Due from related parties, net, current  
$655,532  
$1,488,914 

Due from a related party, net, non-current  
$2,747,313  
$3,640,206 

  

As of March
31, 2024, balances due from Jinkailong, the Company’s equity investee company was $3,245,907, net of allowance for credit losses,
of which, $2,747,313 is to be repaid over a period from April 2025 to March 2026, which was classified as due from a related party,
net, non-current. The balances due from Jinkailong consist of outstanding balance of $2,651,078 as a result of Jinkailong’s
deconsolidation on March 31, 2022 and $594,829 represents revenue collected by Jinkailong on behalf of the Company’s subsidiary,
Jiekai.
 
As of March
31, 2023, balances due from Jinkailong was $5,106,100, representing balance due from Jinkailong as result of Jinkailong’s deconsolidation
on March 31, 2022, of which, $3,640,206 is to be repaid over a period from April 2024 to December 2026, which was classified as due
from a related party, non-current.
 
Movement
of allowance for credit losses due from Jinkailong for March 31, 2024 and 2023 are as follows:
 


  
March 31,  
March 31, 

  
2024  
2023 

Beginning balance 
$1,481,036  
$— 

Addition 
 1,703,563  
 1,484,495 

Translation adjustment 
 (84,898) 
 (3,459)

Ending balance 
$3,099,701  
$1,481,036 

 

On January
3, 2024, Xiang Hu, the Legal Representative of Sichuan Senmiao and a shareholder of the Company, entered into a loan agreement wherein
the Company agreed to provide an interest-free special reserve loan of $150,000 for a period of 12 months. This loan is strictly designated
for the Company’s business development, potential capital market investments, and prospective mergers and business combinations.
As of March 31, 2024, total of $150,000 has been disbursed to Xiang Hu, but no actual spending has been incurred yet. The Company will
monitor the actual spending to determine the utilized amount. Any unused portion must be returned to the Company upon expiration of the
loan.

 

F-32
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
As of March 31, 2024 and 2023,
balance due from Chengdu Youlu Technology Ltd. (“Youlu”), a related party of
the Company were amounted to $6,938 and $23,020, respectively.
 
3) Due to related parties
 


  
March 31,  
March 31, 

  
2024  
2023 

Loan payable to a related party (i) 
$12,354  
$8,667 

Other payable due to related party (ii) 
 158,632  
 — 

Total due to related parties 
$170,986  
$8,667 

 

(i)As
of March 31, 2024 and 2023, the balances represented borrowings from Xi Wen, the CEO of the Company, of which, $12,354 and $8,667 are
unsecured, interest free and due on demand, respectively.

 

(ii)As
of March 31, 2024 and 2023, the balances represented outstanding lease payments due to Hong Li, the Supervisor of Sichuan Senmiao, upon
termination of existing lease.

 
4) Operating
lease right-of-use assets, net, related parties and Operating lease liabilities - related parties
 


  
March 31,  
March 31, 

  
2024  
2023 

Lease II (ii) 
 47,128  
 92,916 

  
    
   

  
March 31,  
March 31, 

  
2024  
2023 

Lease I (i) 
$—  
$82,069 

Lease II (ii) 
 51,741  
 61,393 

Total Operating lease liabilities, current - related parties 
$51,741  
$143,462 

  
   
  

  
March 31,  
March 31, 

  
2024  
2023 

Lease II (ii) 
 —  
 42,247 

  
    
   

 
   (i) On March 31, 2023, the Company entered into two office lease
agreements with Hong Li, supervisor of Sichuan Senmiao, with a leasing term from April 1, 2023 to March 31, 2026, such lease was terminated
in December 2023. On March 1, 2021, the Company entered into an office lease which was set to expire on February 1, 2026. On April 1,
2021, the Company entered into another office lease which was set to expire on April 1, 2024. In October 2022, the Company terminated
the leases signed on March 1, 2021 and April 1, 2021. 
 

(ii)In
November 2018, Hunan Ruixi entered into an office lease agreement with Hunan Dingchentai Investment Co., Ltd. (“Dingchentai”),
a company where one of the Company’s independent directors serves as legal representative and general manager. The term of the
lease agreement was from November 1, 2018 to October 31, 2023 and the rent was approximately $44,250 per year, payable on a quarterly
basis. The original lease agreement with Dingchentai was terminated on July 1, 2019. The Company entered into another lease with Dingchentai
on substantially similar terms on September 27, 2019, and a renewal lease contract was signed on June 2022 which extended the original
lease to May 2025.

 
2. Related
Party Transactions
 
For the
years ended March 31, 2024 and 2023, the Company incurred $96,614 and $177,414, respectively, in rental expenses to Hong Li, supervisor
of Sichuan Senmiao, pursuant to three office lease agreements. 
 
For the
years ended March 31, 2024 and 2023, the Company incurred $41,668 and $47,043, respectively, in rental expenses to Dingchentai, a
company where one of the Company’s independent directors serves as legal representative and general manager. 
 
The Company
had reached cooperation with Jinkailong, the Company’s equity investee company, that the drivers who leased automobile from Jinkailong
completed their online ride-hailing requests and orders through the company’s ride-hailing platform, and the company will pay Jinkailong
a certain promotion service fee. During the years ended March 31, 2024 and 2023, the company incurred promotion fee of $11,115 and
$95,804 payable to Jinkailong.
 
During the years ended March 31, 2024 and 2023,
Corenel leased automobiles to Jinkailong and generated revenue of $34,742 and $344,120, while Jiekai leased automobiles from Jinkailong
and had a rental cost of $472,848 and $509,904 respectively. 

 

F-33
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
18. LEASES
 
Lessor
 

The Company’s
operating leases for automobile rentals have rental periods that are typically short term, generally is twelve months or less. Revenue
recognition section of Note 3 (r), the Company discloses that revenue earned from automobile rentals, wherein an identified asset is transferred
to the customer and the customer has the ability to control that asset, is accounted for under Topic 842 upon adoption for the year ended
March 31, 2024.

 
Lessee
 
As of March
31, 2024 and 2023, the Company has engaged in offices and showroom leases which were classified as operating leases.
 
The Company
leased automobiles under operating lease agreements with a term shorter than twelve months which it elected not to recognize lease assets
and lease liabilities under ASC 842. Instead, the Company recognized the lease payments in profit or loss on a straight-line basis over
the lease term and variable lease payments in the period in which the obligation for those payments is incurred. In addition, the Company
had automobiles leases which were classified as finance lease.
 
The Company’s
lease agreements do not contain any material residual value guarantees or material restrictive covenants.
 
The Company
recognized lease expense on a straight-line basis over the lease term for operating lease. Meanwhile, the Company recognized the finance
leases ROU assets and interest on an amortized cost basis. The amortization of finance ROU assets is recognized on a straight-line basis
as amortization expense, while the lease liability is increased to reflect interest on the liability and decreased to reflect the lease
payments made during the period. Interest expense on the lease liability is determined each period during the lease term as the amount
that results in a constant periodic interest rate of the automobile loans on the remaining balance of the liability.
 
The ROU
assets and lease liabilities are determined based on the present value of the future minimum rental payments of the lease as of the adoption
date, using effective interest rate of 6.0%, which is determined using an incremental borrowing rate with similar term in the PRC.
As of March 31, 2024, the weighted-average remaining operating and finance lease term of its existing leases is approximately 1.63 and 1.53 years,
respectively.
 
Operating
and finance lease expenses consist of the following:
 


  
  
For the Years Ended 

  
Classification 
March 31, 2024  
March 31, 2023 

Operating lease cost 
  
   
  

Automobile lease costs 
Cost of revenues 
$1,737,869  
$2,020,276 

Lease expenses 
Selling, general and administrative 
 207,793  
 355,814 

Finance lease cost 
  
    
   

Amortization of leased asset 
Cost of revenue 
 239,353  
 230,022 

Amortization of leased asset 
General and administrative 
 276  
 100,814 

Interest on lease liabilities 
Interest expenses on finance leases 
 29,088  
 25,675 

Total lease expenses 
  
$2,214,379  
$2,732,601 

 
Operating
lease costs for automobiles totaled $1,737,869 and $2,020,276 for the years ended March 31, 2024 and 2023, respectively. 
 
Operating
lease expenses for offices and showroom leases totaled $206,432 and $355,814 for the years ended March 31, 2024 and 2023, respectively,
of which $199,445 and $380,794 were amortization of leased asset for operating leases for the years ended March 31, 2024 and
2023, respectively. 
 
 
Interest
expenses on finance leases totaled $29,088 and $25,675 for years ended March 31, 2024 and 2023, respectively.  


F-34
 



 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The following
table sets forth the Company’s minimum lease payments in future periods:
 


  
Operating lease  
Finance lease  
  

  
payments*  
payments  
Total 

Twelve months ending March 31, 2025 
$69,001  
$294,906  
$363,907 

Twelve months ending March 31, 2026 
 21,082  
 128,802  
 149,884 

Total lease payments 
 90,083  
 423,708  
 513,791 

Less: discount 
 (3,905) 
 (17,303) 
 (21,208)

Present value of lease liabilities 
$86,178  
$406,405  
$492,583 

 

*As
of March 31, 2024 and 2023, the outstanding balance of operating lease payments due to related parties was $51,741 and $185,709, respectively.

 
19. COMMITMENTS AND CONTINGENCIES
 
Contingencies
 
In measuring
the credit risk of guarantee services to automobile purchasers, the Company primarily reflects the “probability of default”
by the automobile purchasers on its contractual obligations and considers the current financial position of the automobile purchasers
and its likely future development.
 
The Company
manages the credit risk of automobile purchasers by performing preliminary credit checks of each automobile purchaser and ongoing monitoring
every month. By using the current credit loss model, management is of the opinion that the Company is bearing the credit risk to repay
the principal and interests to the financial institutions if automobile purchasers’ default on their payments for more than three
months. Management also periodically re-evaluates probability of default of automobile purchasers to make adjustments in the allowance,
when necessary, as the Company is the guarantor of the loans.
 
Purchase
commitments
 
On September 23, 2022, the Company
entered into a purchase contract with an automobile dealer to purchase a total of 100 automobiles for the amount of approximately
$1.5 million. As of the filing date of these consolidated financial statements, the Company has remitted approximately $0.6 million
as purchase prepayments, and expects to fulfill the purchase commitment before March 31, 2025. 
 
Contingent
liabilities for automobile purchasers
 
Historically,
most of the automobile purchasers would pay the Company their previous defaulted amounts within one to three months. In December 2019,
a novel strain of coronavirus, or COVID-19, surfaced and it has spread rapidly to many parts of China and other parts of the world, including
the United States. The epidemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities in
China and elsewhere. Because substantially all of the Company’s operations are conducted in China, the COVID-19 outbreak has materially
and adversely affected the Company’s business operations, financial condition and operating results for 2021 and 2022, including
but not limited to decrease in revenues, slower collection of accounts receivable and additional allowance for credit losses. Some of
the Company’s customers exited the ride-hailing business and rendered their automobiles to the Company for sublease or sale to generate
income or proceeds to cover payments owed to financial institutions and the Company. For the years ended March 31, 2024 and 2023, the
Company recognized an estimated provision loss of approximately $499 and $7,287 respectively, for drivers who exited the
ride-hailing business were not able to make the monthly payments from operations. As of March 31, 2024, there was no contingent liabilities
Hunan Ruixi had for the automobile purchasers.
 
Contingent
liability of Jinkailong
 
Despite
that the Company holds 35% of equity interest of Jinkailong through Hunan Ruixi, and has not make any consideration towards to the
investment, the Company will be subjected to the maximum amount of RMB3.5 million (approximately $485,000) of which is equivalent
to 35% of liabilities in case Jinkailong is liquidated in accordance with PRC’s company registry compliance.
 

F-35
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
 
20. SEGMENT
INFORMATION
 
The Company
presents segment information after elimination of inter-company transactions. In general, revenue, cost of revenue and operating expenses
are directly attributable, or are allocated, to each segment. The Company allocates costs and expenses that are not directly attributable
to a specific segment, such as those that support infrastructure across different segments, to different segments mainly on the basis
of usage, revenue or headcount, depending on the nature of the relevant costs and expenses. The Company does not allocate assets to its
segments as the CODM does not evaluate the performance of segments using asset information.
 
By assessing
the qualitative and quantitative criteria established by Accounting Standards Codification (“ASC”) 280, “Segment Reporting”,
the Company considers itself to be operating in two reportable segments which comprise of automobile transaction and related
services and online ride-hailing platform. The segments are organized based on type of service offered.
 
The following
tables present the summary of each segment’s revenue, loss from operations, loss before income taxes and net loss which is considered
as a segment operating performance measure, for the years ended March 31, 2024 and 2023:
 


  
For the Year ended March 31, 2024 

  
Automobile  
   
   
  

  
Transaction and  
Online ride-hailing  
   
  

  
Related  
platform  
   
  

  
Services  
Services  
Unallocated  
Consolidated 

Revenues 
$4,320,031  
$2,494,397  
$—  
$6,814,428 

Interest income 
$491  
$98  
$12  
$601 

Depreciation and amortization 
$1,360,598  
$64,442  
$78,517  
$1,503,557 

Loss from operations 
$(2,727,162) 
$(381,845) 
$(1,615,904) 
$(4,724,911)

Loss before income taxes 
$(2,398,572) 
$(441,704) 
$(1,402,954) 
$(4,243,230)

Net loss 
$(2,389,556) 
$(441,704) 
$(1,402,954) 
$(4,234,214)

Capital expenditure 
$671,679  
$—  
$—  
$671,679 

 


  
For the Year ended March 31, 2024 

  
Automobile  
   
   
  

  
Transaction and  
Online ride-hailing  
   
  

  
Related  
platform  
   
  

  
Services  
Services  
Unallocated  
Consolidated 

Revenues 
$4,372,569  
$3,709,945  
$—  
$8,082,514 

Interest income 
$1,533  
$197  
$52  
$1,782 

Depreciation and amortization 
$1,842,745  
$64,217  
$84,401  
$1,991,363 

Loss from operations 
$(4,319,384) 
$(357,916) 
$(1,463,608) 
$(6,140,908)

Loss before income taxes 
$(3,682,810) 
$(356,164) 
$248,281  
$(3,790,693)

Net loss 
$(3,682,810) 
$(356,164) 
$248,281  
$(3,790,693)

Capital expenditure 
$1,151,076  
$26,420  
$—  
$1,177,496 
 


F-36
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
 
The accounting
principles for the Company’s revenue by segment are set out in Note 3(h).
 

As of March
31, 2024, the Company’s total assets were comprised of $8,637,552 for automobile transaction and related services, $575,887 for
online ride-hailing platform services and $648,045 for unallocated.

 
As of March
31, 2023, the Company’s total assets were comprised of $12,579,764 for automobile transaction and related services, $937,400 for
online ride-hailing platform services and $721,451 unallocated.
 
As substantially
all of the Company’s long-lived assets are located in the PRC and substantially all of the Company’s revenue is derived from
within the PRC, no geographical information is presented.
 
21. PARENT-ONLY FINANCIALS 

SENMIAO TECHNOLOGY LIMITED
CONDENSED BALANCE SHEETS
 


  
March 31,  
March 31, 

  
2024  
2023 

  
(Unaudited)  
(Unaudited) 

ASSETS 
   
  

Current Assets 
   
  

Cash and cash equivalents 
$21,124  
$78,693 

Due from subsidiaries 
 11,301,053  
 11,889,775 

Prepayments, other receivables and other current assets, net 
 37,125  
 35,251 

Total Current Assets 
 11,359,302  
 12,003,719 

  
    
   

Other Assets 
    
   

Intangible assets 
 450,000  
 525,000 

Total Assets 
$11,809,302  
$12,528,719 

  
    
   

LIABILITIES AND EQUITY 
    
   

Current Liabilities 
    
   

Accrued expenses and other liabilities 
$495,481  
$340,151 

Derivative liabilities 
 288,833  
 501,782 

Total Current Liabilities 
 784,314  
 841,933 

  
    
   

Other Liabilities 
    
   

Excess of investments in subsidiaries 
 9,895,723  
 7,023,186 

Total Liabilities 
 10,680,037  
 7,865,119 

  
    
   

Commitments and Contingencies 
    
   

Mezzanine Equity (redeemable) 
    
   

Series A convertible preferred stock (par value $1,000 per share, 5,000 shares authorized; 991 and 1,641 shares issued and outstanding at March 31, 2024 and March 31, 2023, respectively) 
 234,364  
 269,386 

  
    
   

Stockholders’ Equity 
    
   

Common stock (par value $0.0001 per share, 500,000,000 shares authorized; 10,518,040 and 7,743,040 shares issued and outstanding at March 31, 2024 and March 31, 2023, respectively) 
 1,051  
 773 

Additional paid-in capital 
 43,950,123  
 43,355,834 

Accumulated deficit 
 (41,384,268) 
 (37,715,294)

Accumulated other comprehensive loss 
 (1,672,005) 
 (1,247,099)

Total Senmiao Technology Limited Stockholders’ Equity 
 894,901  
 4,394,214 

Total Liabilities, Mezzanine Equity and Equity 
$11,809,302  
 12,528,719 
 


F-37
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
SENMIAO TECHNOLOGY LIMITED
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
 


  
For the Years Ended
March 31, 

  
2024  
2023 

General and administrative expenses 
$(1,649,046) 
$(1,451,038)

Change in fair value of derivative liabilities 
 212,949  
 1,711,889 

Equity of losses in subsidiaries 
 (2,232,877) 
 (3,374,600)

Net loss 
 (3,668,974) 
 (3,113,749)

Foreign currency translation adjustment 
 (456,433) 
 (1,137,645)

Comprehensive loss attributable to stockholders 
$(4,125,407) 
$(4,251,394)
 

SENMIAO TECHNOLOGY
LIMITED
CONDENSED STATEMENTS
OF CASH FLOWS
 


  
For the Years Ended March 31, 

  
2024  
2023 

Cash Flows from Operating Activities: 
   
  

Net loss 
$(3,668,974) 
$(3,113,749)

Adjustments to reconcile net loss to net cash used in operating activities: 
    
   

Equity of loss of subsidiaries 
 2,232,877  
 3,374,600 

Amortization of intangible asset 
 75,000  
 75,000 

Stock compensation expense 
 444,300  
 — 

Change in fair value of derivative liabilities 
 (212,949) 
 (1,711,889)

Change in operating assets and liabilities 
    
   

Prepayments, receivables and other current assets 
 (1,872) 
 100,002 

Other receivable – a related party 
 (150,000) 
 — 

Accrued expenses and other liabilities 
 386,682  
 421,815 

Net Cash Used in Operating Activities 
 (894,936) 
 (854,221)

  
    
   

Cash Flows from Financing Activities: 
    
   

Repayment from subsidiaries 
 855,522  
 750,000 

Borrowings from subsidiaries 
 —  
 66,301 

Repayments to a related party 
 (18,155) 
 — 

Net Cash Provided by Financing Activities 
 837,367  
 816,301 

  
    
   

Net decrease in cash and cash equivalents 
 (57,569) 
 (37,920)

Cash and cash equivalents, beginning of year 
 78,693  
 116,613 

Cash and cash equivalents, end of year 
$21,124  
$78,693 

  
    
   

Supplemental Cash Flow Information 
    
   

Cash paid for interest expense 
$—  
$— 

Cash paid for income tax 
$—  
$— 


 
a) Basis of presentation
 
The condensed financial
information of Senmiao Technology Limited, has been prepared using the same accounting policies as set out in the consolidated financial
statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP
have been condensed or omitted by reference to the consolidated financial statements.
 
b) Investments in subsidiaries
and equity of loss in subsidiaries
 
The investments in subsidiaries
consist of investments in Senmiao Consulting, Hunan Ruixi and Yicheng. The equity losses in subsidiaries consist of total equity loss
in Senmiao Consulting, Hunan Ruixi, Yicheng, XXTX, Sichuan Senmiao, Corenel and Jiekai. 


F-38
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
c) Stockholders’
equity
 
Restricted Stock Units
 
On October
29, 2020, the Board approved the issuance of an aggregate of 127,273 restricted stock units (“RSUs”) to directors,
officers and certain employees as stock compensation for their services for the years ended March 31, 2022. Total RSUs granted to these
directors, officers and employees were valued at an aggregate fair value of $140,000. These RSUs will vest in four equal quarterly
installments on January 29, 2021, April 29, 2021, July 29, 2021 and October 29, 2021 or in full upon the occurrence of a change in control
of the Company, provided that the director, officer or the employee remains in service through the applicable vesting date. The RSUs will
be settled by the Company’s issuance of shares of common stock in certificated or uncertificated form upon the earlier of (i) vesting
date, (ii) a change in control and (ii) termination of the services of the director, officer or employee due to a “separation of
service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, or the death or disability of such
director, officer or employee. As of the filing date of these consolidated financial statements, all installment of RSUs with an aggregate
of 12,727 was vested and 9,545 was settled by the Company. The Company expects to settle the remaining vested RSUs
by issuance of shares of common stock before March 31, 2024 and account for the vested RSUs as an addition to both expenses and additional
paid-in capital.
 
Equity Incentive Plan
 
At the 2018
Annual Meeting of Stockholders of the Company held on November 8, 2018, the Company’s stockholders approved the Company’s
2018 Equity Incentive Plan for employees, officers, directors and consultants of the Company and its affiliates. At the 2022 Annual Meeting
of Stockholders of Company held on March 30, 2023, the Company’s stockholders approved the amendment to the 2018 Equity Incentive
Plan, to increase the number of shares of common stock reserved under the Plan to 1,500,000 shares. A committee consisting of
at least two independent directors would be appointed by the Board or in the absence of such a committee, the board of directors,
will be responsible for the general administration of the Equity Incentive Plan. All awards granted under the Equity Incentive Plan will
be governed by separate award agreements between the Company and the participants. As of March 31, 2024, the Company has granted an aggregate
of 30,379 RSUs (after reverse split), among which, 26,447 RSUs were issued
under the Equity Incentive Plan, 3,182 RSUs were vested but have not been issued while 750 RSUs were forfeited due to two directors
ceased to serve on the board of the Company since November 8, 2018.
 
1-for-10 shares reverse split
on common stock
 
The Company
considered the above transactions after giving a retroactive effect to a 1-for-10 reverse stock split of its common stock which became
effective on April 6, 2022. The Company believed it is appropriate to reflect the above transactions on a retroactive basis similar to
those after a stock split or dividend pursuant to ASC 260. All shares and per share amounts used herein and in the accompanying consolidated
financial statements have been retroactively stated to reflect the effect of the reverse stock split. Upon execution of the 1-for-10 reverse
stock split, the Company recognized additional 8,402 shares of common stock due to round up issue.
 
Conversion
Price Adjustment for November 2021 Preferred Shares
 
Pursuant
to the Certificate of Designation for the series A convertible preferred stock signed by the Company and certain institutional investors
in November 2021 Private Placement, the initial conversion price of the series A Convertible Preferred Shares was $0.68. If as of the
applicable date the conversion price then in effect is greater than the greater of (1) $0.41 (the “floor Price”) (as
adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) and (2) 85% of the closing
bid price on the applicable date (the “Adjustment Price”), the conversion price shall automatically lower to the Adjustment
Price accordingly. As the 1-for-10 reverse stock split on the Company’s Common Stock became effective on April 6, 2022, the conversion
price of the Preferred Shares was adjusted to $4.1. As of March 31, 2024 and 2023, there were 991 and 1,641 shares
of Series A convertible preferred stock outstanding, respectively, valued at $234,364 and $269,386, recorded as mezzanine equity.
As of March 31, 2024, 4,009 shares of Series A convertible preferred stock were converted into 1,871,125 shares of
the Company’s common stock. Further, on August 9, 2022, the Company and the investors agreed to reduce the conversion price of the
series A Convertible Preferred Shares from $4.10 to $2.00 and to increase the number of the shares of common stock that are
available to be issued upon conversion of the Preferred Shares from 1,092,683 to 2,240,000. 



F-39
 

 
SENMIAO TECHNOLOGY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Common stock issued for consulting
services
 
In October
2023, the Company entered into three different consulting and services agreements (the “Consulting Agreements”) with three
consultants (the “Consultants”), pursuant to which the Company engaged the Consultant to provide certain merger and acquisition
consulting service, market research and business development advisory services, and financial consulting services, respectively. As compensation
for the services, the Company agreed to issue the Consultants an aggregate of 1,500,000 shares of its common stock, par value
$0.0001. The Company recognized the non-employee share-based payment equity awards by using the grant-date fair values at the time of
signing agreement. On November 7, 2023, the issuance of 1,500,000 shares of the Company’s common stock has been completed
and the Company recorded $444,300 service expense during the years ended March 31, 2024.
 
Change of ownership interest in a subsidiary
 On February 11, 2024, The Company and Hunan
Ruixi’s two minority shareholders (“Shareholders”) has entered into a share swap agreement (“Share Swap
Agreement”). Pursuant to the Share Swap Agreement, the Company would issue a total of 950,000 shares of its common stock to the
above mentioned two Shareholders. In return, each shareholder will transfer a 2.5% equity interest in Hunan
Ruixi to the Company, which increasing the Company’s ownership in Hunan Ruixi
by 5%. As no cash consideration was received, $155,461 which is the difference between the fair value of the consideration received
and the amount by which the non-controlling interest is adjusted was recognized as an addition in additional paid-in capital in accordance
with ASC 810-10-45-23 “Change in a parent’s ownership interest in a subsidiary”. 

 
22. SUBSEQUENT EVENTS
 
The Company
evaluated all events and transactions that occurred after March 31, 2024 up through the date the Company filed these consolidated financial
statements. No events require adjustment to or disclosure in the consolidated financial statements.
 


F-40
 

 
Item
9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
 
None.
 
 Item 9A. Controls and Procedures.
 
Evaluation
of Disclosure Controls and Procedures
 
As
of the end of the period covered by this Report, we carried out an evaluation, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) under the supervision and
with the participation of our management, including our principal executive officer and principal financial officer, Based on the foregoing
evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2024, our disclosure controls
and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.
 
Management’s
Report on Internal Control over Financial Reporting
 
Our
management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Under the supervision and with
the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting as of March 31, 2024, based on the Internal Control-Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 Framework). Based on this
evaluation under the 2013 Framework, our principal executive officer and principal financial officer have concluded that our internal
control over financial reporting was not effective March 31, 2024 due to the following material weaknesses:
 

●We
did not have sufficient personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAP accounting
issues and to prepare and review financial statements and related disclosures under U.S. GAAP. Specifically, our control did not operate
effectively to ensure the appropriate and timely analysis of and accounting for unusual and non-routine transactions and certain financial
statement accounts;

 

●We
are lacking adequate policies and procedures in internal audit function to ensure that our policies and procedures have been carried
out as planned; and

 

●We
had deficiencies in our IT general controls regarding to the Logical Access Security, Change Management, IT Operations and Cybersecurity
of our financial system and key application system, etc.

 
A material weakness is a deficiency, or a combination of deficiencies,
within the meaning of PCAOB Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely
basis. During the year ended March 31, 2024, we are in the progress of improving our system security environment and conducting regular
backup plans to ensure network and information security. We also kept refining the operational and financial system for our businesses
to warn of risks and support management’s ability to make significant decisions. We are also developing a comprehensive system which
could combine interactive information between our Automobile Transaction and Related Services and Online Ride-hailing Platform Services.
We plan to address the weaknesses identified above by implementing the following measures:
 

(i)Continuously
hiring additional accounting staffs with comprehensive knowledge of U.S. GAAP and SEC reporting requirements;

 

(ii)Ameliorating
our internal audit to assist with assessment of Sarbanes-Oxley compliance requirements and improvement of internal controls related to
financial reporting; and

 

(iii)improving
our IT environment and daily management.

 
Changes
in Internal Control over Financial Reporting
 
There
has been no change in our internal control over financial reporting that occurred during the fourth quarter of the year ended March 31,
2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 Item 9B. Other Information
 
Trading Plans
 
During the fiscal quarter
ended March 31, 2024, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule
10b5-1 trading arrangement”, as those terms are defined in Regulation S-K, Item 408.  
 
Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 
 
Not
applicable.
 


88
 

 
PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
 
Directors
and Executive Officers
 
Our
current directors and officers are as follows:
 


Name
 
Age
 
Position

Xi
    Wen
 
41
 
Chief Executive Officer,
    Chairman of the Board, President and Secretary, Executive Director of Sichuan Senmiao

Xiaoyuan
    Zhang
 
36
 
Chief Financial Officer
    and Treasurer

Haitao
    Liu
 
52
 
Chief Operating Officer

Xiaojuan
    Lin
 
58
 
Director

Trent
    D. Davis
 
56
 
Director

Sichun
    Wang
 
36
 
Director

Jie
    Gao
 
45
 
Director

 
Xi
Wen has been serving as President, Secretary and Director of the Company since June 2017, was appointed as Chairman
of the board on July 20, 2017 and our Chief Executive Officer on August 1, 2018. Mr. Wen has over 10 years of experience
in finance and investment management. He has been serving as Executive Director of Sichuan Senmiao since February 2017, in charge
of all aspects of Senmiao’s operations. Immediately prior to joining Senmiao, Mr. Wen served as a director of Chenghexin,
where he was responsible for overseeing the operations of the Aihongsen lending platform from May 2015 to February 2017. He
also founded Chengdu Fubang Zhuoyue Investment Co. in September 2013 and served as General Manager until May 2015. From January 2009
to August 2013, Mr. Wen was the General Manager of Chengdu Haiyuan Trading Co., Ltd., in charge of the company’s
daily operations. Mr. Wen holds a Bachelor’s degree in Business and Economics from Manchester Metropolitan University in Manchester,
United Kingdom. Mr. Wen is qualified to serve on our board of directors due to his knowledge of our businesses and expertise in
business management, finance and investment.
 
Xiaoyuan
Zhang has been serving as our Chief Financial Officer since September 17, 2018. She has served as a director and the chairperson
of the Audit Committee of Color Star Technology Co., Ltd. (Nasdaq: CSCW), a provider of online and offline education services in
China, since July 2019 to March 29, 2021. Ms. Zhang previously served as Senior Auditor and Assurance Manager of Ernst &
Young Hua Ming LLP, Chengdu Branch, from October 2010 to September 2018 where she participated in audits of several public
companies listed in China, Hong Kong and Singapore, as well as large state-owned and foreign investment enterprises. Ms. Zhang received
her dual bachelor’s degrees in accounting and law from Southwestern University of Finance and Economics in Chengdu, China. Ms. Zhang
is an intermediate accountant and a Certified Public Accountant of the Chinese Institute of Certified Public Accountants.
 
Haitao
Liu has been serving as the Chief Executive Officer of Sichuan Senmiao since August 1, 2018. On September 10, 2020,
Mr. Haitao Liu tendered his voluntary resignation as Chief Executive Officer of Sichuan Senmiao. On the same date, the Board appointed
Mr. Haitao Liu to serve as the Company’s Chief Operating Officer. Mr. Liu previously served as Chief Executive Officer
of Shenzhen Qianhai Tuteng Internet Financial Services Co., Ltd., a peer-to-peer online lending company specialized in auto loans,
from May 2015 to April 2018. Prior to that, he served as the Deputy General Manager of Chengdu High-Tech Zone Xingrui Microfinance
Co., Ltd., a company offering loans to small businesses and individuals, from May 2012 to April 2015, as the Chief Financial
Officer of Sichuan Information Industry Co., Ltd., an information technology company, from July 2006 to May 2012, and
as the Deputy General Manager of Sichuan Zhongxin Hengde CPA Co., Ltd. from June 2000 to July 2006. He also served as
a civil servant in Chenghua District People’s Government of Chengdu from June 1993 to June 2000. Mr. Liu received
a master’s degree in EMBA (Finance) from Southwestern University of Finance and Economics, a bachelor’s degree in Business
Administration from Southwest Jiaotong University and an associate degree in Commercial Economy from Southwestern University of Finance
and Economics in China.
 
Xiaojuan
Lin has been a director of the Company since July 20, 2017. Since March 2011, Ms. Lin has been the legal
representative and Executive General Manager of Hunan Dinchentai Investment Co. Ltd. She previously served as Deputy General Manager
and Finance Manager of Hunan Xinhongxin Group from April 2004 to February 2010 where she was in charge of the group’s
finance, tax and accounting matters. From August 2000 to March 2004, Ms. Lin served as Finance Manager for Northwest Region
at Tianjin Jiashijian Commercial Group, where she managed the group’s finance, tax and accounting matters. She also acted as Budgeting
and Accounting Manager of Cygent Hotel from 1986 to 2000. Ms. Lin holds a Bachelor’s degree in Statistics from Hunan Finance
University in Hunan, China. She is a Certified Public Accountant in China. Ms. Lin is qualified to serve on our board of directors
due to her expertise in accounting and finance.
 


89
 

 
Trent
D. Davis has been a director of the Company since March 21, 2018. Mr. Davis is currently the Chief Executive Officer
of Paulson Investment Company, LLC, which is a boutique investment firm specializing in private equity offerings for small to mid-cap
markets. Formerly, from December 2014 to December 2018, Mr. Davis was President and Chief Operating Officer of Whitestone
Investment Network, Inc., which specializes in providing executive advisory services to small entrepreneurial companies, as well
as restructuring, recapitalizing, and making strategic investments in small to midsize companies. Currently, Mr. Davis is a Director
for INVO Bioscience (OTC: INVOD), which is a medical device company focused on creating simplified, lower cost treatments for patients
diagnosed with infertility. Formerly, from September 2016 to August 2019, Mr. Davis was Vice Chairman and Lead Director
of Eastside Distilling Inc. (Nasdaq: EAST), a manufacturer of high-quality, master-crafted spirits. As the Lead Independent Director
Dataram Corporation (Nasdaq: DRAM), which develops, manufactures, and markets memory products primarily used in enterprise servers and
workstations worldwide, from July 2015 to April 2017, Mr. Davis helped the company successfully complete the reverse merger
with U.S. Gold Corp (Nasdaq: USAU), a gold exploration and development company. Previously, from December 2014 to July 2015,
Mr. Davis was Chairman of the Board for Majesco Entertainment Company (Nasdaq: COOL), an innovative developer, marketer, publisher,
and distributor of interactive entertainment for consumers around the world. From November 2013 until July 2014, Mr. Davis
served as the President and Director of Paulson Capital Corp. (Nasdaq: PLCC) until he successfully completed the reverse merger of Paulson
with VBI Vaccines (Nasdaq: VBIV). He went on to serve as a member of its Board of Directors and Audit Committee until May 2016.
Mr. Davis was also the Chief Executive Officer of Paulson Investment Company, Inc., a subsidiary of Paulson Capital Corp, from
July 2005 to October 2014, and is credited with overseeing the syndication of approximately $600 million for over 50 client
companies in both public and private transactions. In 2003, Mr. Davis served as Chairman of the Board of the National Investment
Banking Association. Mr. Davis holds a B.S. in Business and Economics from Linfield College and an M.B.A. from University of Portland.
Mr. Davis is qualified to serve on our board of directors because of his deep knowledge of finance and public company issues, capital
market, advisory and entrepreneurial experiences, and extensive expertise in operational and executive management.
 
Sichun
Wang has been a director of the Company since November 8, 2018. Ms. Wang has served as the senior investment manager
and financial controller of SWHY SDH Equity Investment Management, an equity investment and management company, since October 2016,
where she leads the financial department of the company and participated in several pre-initial-public offering, mergers and acquisitions
and secondary offering projects. From February 2016 to April 2016, she served as the trust manager of JIC Trust Company Limited,
a trust and financial company. Prior to that, Ms. Wang served as the assistant manager of KPMG Huazhen from September 2011
to January 2016, where she participated in audits of multiple companies and achieved Bravo Award for outstanding performance. Ms. Wang
received her Bachelor of Arts degree in accounting with honors from Michigan State University in East Lansing, MI. She is a Certified
Public Accountant in China. Ms. Wang is qualified to serve on our board of directors due to her expertise in accounting and auditing
and her experience with capital market and corporate financing.
 
Jie
Gao has served as a director of the Company since November 8, 2018. She has been the general manager of Hunan Ruixi, our
majority owned subsidiary, since February 2018. She has also served as the executive director of Ruixi Leasing, a wholly owned subsidiary
of Hunan Ruixi, since April 2018. Prior to that, she was the executive director of Guangdong Hu Mao Sheng Tang Fund Management
Co., Ltd., a fund management company, from May 2017 to January 2018, where she was responsible for the establishment and
management of the finance and investment department. She served as the project director of finance and investment department of Resgreen
Biotechnology Group Co., Ltd., a biotechnology company, from October 2003 to March 2017. Before that, she also served
in administrative positions in electronic technology companies in Changsha, Hunan, China. She received an associate’s degree in
hotel secretary from Hunan University of Commerce in Changsha, Hunan, China. Ms. Gao is qualified to serve on our board of directors
due to her experience in business management, investment and finance.
 
Family
Relationships
 
There
are no family relationships, or other arrangements or understandings between or among any of the directors, executive officers or other
persons pursuant to which such person was selected to serve as a director or officer.
 
Board
Diversity
 
The
Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity. However, the Board of Directors
and the Nominating and Corporate Governance Committee believe that it is essential that the members of the Board of Directors represent
diverse viewpoints. In considering candidates for the Board of Directors, the Board of Directors and the Nominating and Corporate Governance
Committee consider the entirety of each candidate’s credentials in the context of the factors mentioned above. The Company is currently
in compliance with the diversity requirements of Nasdaq Rule 5605(f) and 5606, with three female Asian directors and one male Asian director.
 


90
 

 


Board Diversity Matrix (As of March 31, 2024)

 

Total Number of Directors 
5 

  
  

  
   
   
   
Did Not 

  
   
   
   
Disclose 

  
Female  
Male  
Non-Binary  
Gender 

Part I: Gender Identity 
   
   
   
  

Directors 
 3  
 2  
 —  
 — 

Part II: Demographic Background 
    
    
    
   

African American or Black 
 —  
 —  
 —  
 — 

Alaskan Native or Native American 
 —  
 —  
 —  
 — 

Asian 
 3  
 1  
 —  
 — 

Hispanic or Latinx 
 —  
 —  
 —  
 — 

Native Hawaiian or Pacific Islander 
 —  
 —  
 —  
 — 

White 
 —  
 1  
 —  
 — 

Two or More Races or Ethnicities 
 —  
 —  
 —  
 — 

LGBTQ+ 
 —  
 —  
 —  
 — 

Did Not Disclose Demographic Background 
 —  
 —  
 —  
 — 

 
Board
Committees
 
Our
board of directors currently have an Audit Committee, Compensation Committee, and Nomination and Corporate Governance Committee. Each
committee’s members and functions are described below.
 
Audit
Committee.   Our audit committee consists of Ms. Lin, Mr. Davis and Ms. Wang, and is chaired by Ms. Wang.
Each of our audit committee members satisfies the “independence” requirements of the Nasdaq listing rules of and meet
the independence standards under Rule 10A-3 under the Exchange Act. We have determined that Ms. Lin qualifies as an “audit
committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the
financial statements of our company. The audit committee is responsible for, among other things:
 

●selecting
the independent registered public accounting firm and pre-screening all auditing and non-auditing services permitted to be performed
by the independent registered public accounting firm;

 

●reviewing
with the independent registered public accounting firm any audit problems or difficulties and management’s response;

 

●reviewing
and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act;

 

●discussing
the annual audited financial statements with management and the independent registered public accounting firm;

 

●reviewing
the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies;

 

●annually
reviewing and reassessing the adequacy of our audit committee charter;

 

●meeting
separately and periodically with management and the independent registered public accounting firm; and

 

●reporting
to the board of directors.

 


91
 

 
Compensation
Committee.  Our compensation committee consists of Ms. Lin, Ms. Wang and Mr. Davis and is chaired by Ms. Lin.
Each of the compensation committee members satisfies the “independence” requirements of the listing rules of Nasdaq.
The compensation committee assists the board of directors in reviewing and approving the compensation structure, including all forms
of compensation, relating to our directors and executive officers. Our executive officers may not be present at any committee meeting
during which their compensation is deliberated upon. The compensation committee is responsible for, among other things:
 

●reviewing
the total compensation package for our executive officers and making recommendations to the board of directors with respect to it;

 

●approving
and overseeing the total compensation package for our executives other than the three most senior executives;

 

●reviewing
the compensation of our directors and making recommendations to the board of directors with respect to it; and

 

●periodically
reviewing and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, and employee
pension and welfare benefit plans.

 
Nominating
and Corporate Governance Committee.   Our nominating and corporate governance committee consists of Ms. Lin,
Ms. Wang and Mr. Davis, and is chaired by Ms. Lin. Each member of our nominating and corporate governance commit satisfies
the “independence” requirements of the Nasdaq listing rules. The nominating and corporate governance committee assists the
board of directors in selecting individuals qualified to become our directors and in determining the composition of the board of directors
and its committees. The nominating and corporate governance committee is responsible for, among other things:
 

●recommending
nominees to the board of directors for election or re-election to the board of directors, or for appointment to fill any vacancy on the
board of directors;

 

●reviewing
annually with the board of directors the current composition of the board of directors with regards to characteristics such as independence,
age, skills, experience and availability of service to us;

 

●selecting
and recommending to the board of directors the names of directors to serve as members of the audit committee and the compensation committee,
as well as of the nominating and corporate governance committee itself; and

 

●monitoring
compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure
proper compliance.

 
Compensation
Committee Interlocks and Insider Participation
 
None
of the members of our compensation committee is or has been an officer or employee of our Company. None of our officers and directors
currently serves, or in the past years has served, as a member of the compensation committee or other board committee performing equivalent
functions of any entity that has one or more executive officers serving on our board of directors or Compensation Committee.
 
Delinquent
Section 16(a) Reports
 
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our officers, directors and persons who beneficially own more than ten percent of our common stock to file reports of
ownership and changes in ownership with the SEC. These reporting persons are also required to furnish us with copies of all Section 16(a) forms
they file. Based solely upon a review of such forms, we believe that during the year ended March 31, 2024 there were no delinquent filers.
 
Code
of Ethics
 
We
have adopted a written code of ethics that applies to all of our directors, officers and employees in accordance with the rules of
the Nasdaq Stock Market and the SEC. We have filed copies of our code of ethics, our audit committee charter, our compensation committee
charter and our nominating committee charter as exhibits to our registration statement in connection with our IPO. You may review these
documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the code of ethics will
be provided without charge upon request to us.
 


92
 

 
Involvement
in Certain Legal Proceedings
 
None
of our directors and executive officers have been involved in any of the following events during the past ten years:
 

1.any
bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time;

 

2.any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

3.being
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or
to be associated with any person practicing in banking or securities activities;

 

4.being
found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

 

5.being
subject of, or a party to, any federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed,
suspended or vacated, relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or
regulation respecting financial institutions, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any
business entity; or

 

6.being
subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization,
any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members
or persons associated with a member.

 
 Item 11. Executive Compensation
 
Summary
Compensation Table
 
The
following table sets forth the cash and non-cash compensation awarded to or earned by: (i) each individual who served as the executive
officers of our company during the years ended March 31, 2024 and 2023. For purposes of this document, these individuals are collectively
referred to as the “named executive officers” of the Company.
 


  
   
   
   
   
   
   
Nonqualified  
   
  

  
   
   
   
   
   
Non-equity  
deferred  
   
  

  
   
   
   
Stock  
Option  
incentive plan  
compensation  
All other  
  

  
   
Salary  
Bonus  
awards  
awards  
compensation  
earnings  
compensation  
Total 

Name and principal position 
Year  
($)  
($)  
($)  
($)  
($)  
($)  
($)  
($) 

Xi Wen 
 2024  
 183,716  
 —  
 —  
 —  
 —  
 —  
 —  
 183,716 

Chief Executive Officer, 
    
    
    
    
    
    
    
    
   

 Chairman, President and Secretary (1) 
 2023  
 187,570  
 50,000  
 —  
 —  
 —  
 —  
 —  
 237,750 

  
    
    
    
    
    
    
    
    
   

Xiaoyuan Zhang, Chief Financial 
 2024  
 75,372  
 —  
 —  
 —  
 —  
 —  
 —  
 75,372 

Officer and Treasurer 
 2023  
 78,842  
 —  
 —  
 —  
 —  
 —  
 —  
 78,842 

  
    
    
    
    
    
    
    
    
   

Chunhai Li, Chief Technology (2) 
 2023  
 54,615  
 —  
 —  
 —  
 —  
 —  
 13,646  
 68,261 

  
    
    
    
    
    
    
    
    
   

Haitao Liu 
 2024  
 75,344  
 —  
 —  
 —  
 —  
 —  
 —  
 75,344 

Chief Operating Officer 
 2023  
 78,813  
 —  
 —  
 —  
 —  
 —  
 —  
 78,813 

 
 

 

(1)Except
Mr. Wen’s salaries paid for his services as Chief Executive Officer of the Company, other executive officers received their salaries
in Renminbi which were translated into U.S. dollars at the average exchange rate used to translate statement of operations items, which
was RMB7.1671 to US$1.00 for the year ended March 31, 2024 and RMB6.8516 to US$1.00 for the year ended March 31, 2023.

 

(2)Mr.
Chunhai Li resigned from his position as the Chief Technology Officer of the Company on March 31, 2023. The Company shall pay him a compensation
of $13,646.

 


93
 

 
Employment
Agreements and Potential Payments Upon Termination
 
Xi
Wen, Chief Executive Officer, Chairman of the Board, President and Secretary
 
On May 27, 2019, the Company
and Mr. Wen entered into an employment agreement (the “Wen Agreement”) to memorialize the compensation arrangement and
the other terms of Mr. Wen’s continuing employment with the Company and Sichuan Senmiao. Under the Wen Agreement, Mr. Wen
is entitled to the following compensation: (i) an annual salary of US$100,000 for his service as Chief Executive Officer of the Company,
payable quarterly in arrears, starting upon the Company’s receipt of proceeds from a financing of at least $1,000,000; (ii) an
annual salary of RMB600,000 (approximately US$87,354) for his service as the Executive Director for Sichuan Senmiao, payable monthly in
arrears starting upon the Company’s receipt of proceeds from a financing of at least $1 million; and (iii) a cash bonus of
up to US$50,000 for his services as Chief Executive Officer of the Company for each fiscal year upon satisfaction of certain annual performance
targets as reviewed by the Compensation Committee.
 
Mr. Wen
is also entitled to participate in the Company’s equity incentive plans and other Company benefits (including health insurance,
vacation and expense reimbursement), each in accordance with the Company’s policies as determined by the Board from time to time.
The Wen Agreement has an initial term of three years and is subject to successive, automatic one-year extensions unless either party
gives notice of non-extension to the other party at least 30 days prior to the end of the applicable term.
 
Pursuant
to the Wen Agreement, the Company may terminate Mr. Wen’s employment for cause (as defined in the Wen Agreement), at any time,
without notice. Upon a termination for cause, Mr. Wen will not be entitled to receive payment of any severance benefits or other
amounts by reason of the termination, and his right to all other benefits will terminate, except as required by any applicable law.
 
The
Company may also terminate Mr. Wen’s employment without cause upon 30 days’ advance written notice. In the case of such
a termination by the Company, the Company is required to provide the following severance payments and benefits to Mr. Wen: (1) a
lump sum cash payment equal to three (3) months of the base salary as of the date of such termination; (2) a lump sum cash
payment equal to a pro-rated amount of his target annual bonus for the year immediately preceding the termination, if any; (3) payment
of premiums for continued health benefits under the Company’s health plans for three (3) months following the termination,
if any; and (4) immediate vesting of 100% of the then-unvested portion of any outstanding equity awards held by Mr. Wen.
 
In
addition, if the Company or its successor terminates the Wen Agreement upon a merger, consolidation, or transfer or sale of all or substantially
all of the assets of the Company with or to any other individual(s) or entity, Mr. Wen shall be entitled to the following severance
payments and benefits upon such termination: (1) a lump sum cash payment equal to three months of the base salary at a rate equal
to the greater of his annual salary in effect immediately prior to the termination, or his then current annual salary as of the date
of such termination; (2) a lump sum cash payment equal to a pro-rated amount of his target annual bonus for the year immediately
preceding the termination; (3) payment of premiums for continued health benefits under the Company’s health plans for three
months following the termination; and (4) immediate vesting of 100% of the then-unvested portion of any outstanding equity awards
held by Mr. Wen.
 
Pursuant
to the Wen Agreement, Mr. Wen may terminate his employment at any time with 30 days’ advance written notice without cause
or if there is any significant change in his authority, duties and responsibilities or a material reduction in his annual salary. In
such case, Mr. Wen will be entitled to receive compensation equivalent to three months of his base salary.
 
In
order to receive any severance benefits under the Wen Agreement, Mr. Wen will be required to execute and deliver to the Company
a general release of claims in a form reasonably satisfactory to the Board.
 
The
Wen Agreement also contains customary restrictive covenants relating to confidentiality, non-competition and non-solicitation.
 
Xiaoyuan
Zhang, Chief Financial Officer and Treasurer
 
On
September 17, 2018, the Company and Ms. Zhang entered into an employment agreement (the “Zhang Agreement”). Under
the Zhang Agreement, Ms. Zhang is entitled to an annual salary of RMB540,000 (approximately US$78,620) for her services as Chief Financial
Officer and Treasurer of the Company. She is also entitled to participate in the Company’s equity incentive plans and other Company
benefits, each as determined by the Board from time to time. Her employment has an initial term of one year and is subject to successive,
automatic one-year extensions unless either party gives notice of non-extension to the other party at least 30 days prior to the end
of the applicable term.
 


94
 

 
Pursuant
to the Zhang Agreement, the Company may terminate Ms. Zhang’s employment for cause, at any time, without notice or remuneration,
for certain acts, such as conviction or plea of guilty to a felony or grossly negligent or dishonest acts to the detriment of the Company,
or misconduct or a failure to perform agreed duties. In such case, Ms. Zhang will not be entitled to receive payment of any severance
benefits or other amounts by reason of the termination, and her right to all other benefits will terminate, except as required by any
applicable law. The Company may also terminate Ms. Zhang’s employment without cause upon 30 days’ advance written notice.
In such case of termination by the Company, the Company is required to provide the following severance payments and benefits to Ms. Zhang:
a cash payment of one month of base salary as of the date of such termination for each year (which is any period longer than six months
but no more than one year) and a cash payment of half month of base salary as of the date of such termination for any period of employment
no more than six months, provided that the total severance payments shall not exceed twelve months of base salary.
 
Pursuant
to the Zhang Agreement, Ms. Zhang may terminate her employment at any time with 30 days’ advance written notice if there is
any significant change in her duties and responsibilities or a material reduction in her annual salary. In such case, Ms. Zhang
will be entitled to receive compensation equivalent to 3 months of her base salary. In addition, if the Company or its successor terminates
the Zhang Agreement upon a merger, consolidation, or transfer or sale of all or substantially all of the assets of the Company with
or to any other individual(s) or entity, Ms. Zhang shall be entitled to the following severance payments and benefits upon
such termination: (1) a lump sum cash payment equal to 3 months of base salary at a rate equal to the greater of her annual
salary in effect immediately prior to the termination, or her then current annual salary as of the date of such termination; (2) a
lump sum cash payment equal to a pro-rated amount of target annual bonus for the year immediately preceding the termination; (3) payment
of premiums for continued health benefits under the Company’s health plans for 3 months following the termination; and (4) immediate
vesting of 100% of the then-unvested portion of any outstanding equity awards held by Ms. Zhang.
 
The
Zhang Agreement also contains customary restrictive covenants relating to confidentiality, non-competition and non-solicitation.
 
Chunhai
Li, Former Chief Technology Officer
 
Mr.
Li resigned from his position as the Chief Technology Officer of the Company and Chief Technology Officer of Sichuan Senmiao on March
31, 2023.
 
Haitao
Liu, Chief Operating Officer
 
Mr. Liu
serves as the Chief Executive Officer of Sichuan Senmiao pursuant to his employment agreement with Sichuan Senmiao, dated August 1,
2018. The term of his employment was for one year, subject to a one-month probation period. He is entitled to a monthly salary of RMB45,000
(approximately US$6,551) except that he will receive RMB36,000 (approximately US$5,241) for his probation period. The employment may
be terminated (i) by mutual consent, (ii) immediately for cause by Sichuan Senmiao, (iii) for incapacity after non-work
related illness or injury by Sichuan Senmiao with a 30-day prior written notice or a one-month salary as severance payment, (iii) by
a 30-day prior written notice from Mr. Liu and a three-day prior notice during the probation period, or (iv) immediately for
cause by Mr. Liu. In connection with the employment agreement, Mr. Liu and Sichuan Senmiao entered into a confidentiality agreement,
pursuant to which Mr. Liu agreed not to release or disclose Sichuan Senmiao’s confidential information.
 
Despite
the expiration of his employment agreement, Mr. Liu has agreed to continue to serve as the Chief Executive Officer of Sichuan Senmiao
as well as assist to oversee our Automobile Transaction and Related Services after the discontinuation of our P2P business under the
same terms of his employment agreement.
 
On
September 10, 2020, Mr. Haitao Liu tendered his voluntary resignation as Chief Executive Officer of Sichuan Senmiao. On the
same date, the Board appointed Mr. Haitao Liu to serve as the Company’s Chief Operating Officer. Effective September 11,
2020, the Company and Mr. Liu entered into an employment agreement (the “Liu Agreement”). Under the Liu Agreement, Mr. Liu
is entitled to an annual salary of RMB540,000 (approximately US$77,000) for his service as Chief Operating Officer of the Company. He is
also entitled to participate in the Company’s equity incentive plans and other Company benefits, each as determined by the Board
from time to time. His employment has an initial term of one year and is subject to successive, automatic one-year extensions unless
either party gives notice of non-extension to the other party at least 30 days prior to the end of the applicable term.
 
Outstanding
Equity Awards at Fiscal Year-End
 
As
of Mach 31, 2024, there was no outstanding equity awards of executive officers.
 


95
 

 
Director
Compensation
 
The
following table sets forth certain information concerning the compensation of our then serving executive directors for the fiscal year
ended March 31, 2024, except that the compensation of Xi Wen as a director is included in “– Summary Compensation Table”:
 


  
Fees  
   
   
   
Nonqualified  
   
  

  
earned  
   
   
Non-equity  
deferred  
   
  

  
or  
Stock  
Option  
incentive plan  
compensation  
All other  
  

  
paid in  
awards  
awards  
compensation  
earnings  
compensation  
Total 

  
cash $  
$  
$  
$  
$  
$  
$ 

Xiaojuan Lin 
 20,000  
 —  
 —  
 —  
 —  
 —  
 20,000 

Trent Davis 
 40,000  
 —  
 —  
 —  
 —  
 —  
 40,000 

Sichun Wang 
 20,000  
 —  
 —  
 —  
 —  
 —  
 20,000 

Jie Gao 
 20,000  
 —  
 —  
 —  
 —  
 —  
 20,000 

 
The Company has accrued payments
to each of the directors an annual retainer of $20,000 except that Mr. Trent with an annual retainer of $40,000 for the fiscal
years ended March 31, 2024 and 2023. The Company expect to settle the payment within December 2024. They will also be reimbursed for reasonable,
pre-approved expenses in connection with the performance of their services.
 
As of March 31, 2024, the
Company has issued accumulated 23,720 RSUs (after reverse split) to directors, of which 2,273 was vested but not issued by the Company.
During the year ended March 31, 2024, the Company did not issue RSUs to directors. The Company accounted for the vested RSUs as expenses
and charged to common stock. The fair value of the vested RSUs is calculated at the grant date market price of the Company’s common
stock multiplying by the number of vested shares. The Company expects to settle the vested RSUs by issuance of shares of common stock
within December 2024.
 
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 
 
On June 24, 2024, there were
10,518,040 shares of common stock outstanding, which does not include the shares of common stock underlying the vested RSUs. The following
table sets forth certain information known to us with respect to the beneficial ownership of common stock as of that date by (i) each
of our directors, (ii) each of our executive officers, (iii) all of our directors and executive officers as a group, and (iv) each person,
or group of affiliated persons, whom we know to beneficially own more than 5% of our common stock.
 
Unless
otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares
beneficially owned by them.
 


  
Amount and  
  

  
Nature of  
Percentage of 

  
Beneficial  
Outstanding 

Name and Address of Beneficial Owner (1) 
Ownership  
Shares 

5% Stockholders 
   
  

Senmiao International Investment Group Limited (2) 
 1,057,500  
 10.1%

Officers and Directors 
    
   

Xiaoyuan Zhang (3) 
 1,364  
 * 

Haitao Liu (4) 
 909  
 * 

Chunhai Li (5) 
 455  
 * 

Xi Wen (6) 
 117,624  
 1.1%

Xiaojuan Lin (7) 
 5,349  
 * 

Trent D. Davis (7) 
 5,349  
 * 

Jie Gao (8) 
 4,849  
 * 

Sichun Wang (8) 
 4,849  
 * 

All directors and executive officers as a group (eight individuals) 
 140,748  
 1.3%

 
 


*Less
than 1%.

 

(1)Unless
otherwise indicated, the business address of each of the individuals is 16F, Building A, Shihao Square, Middle Jiannan Avenue, High-Tech
Zone, Chengdu, Sichuan, China.

 


96
 

 

(2)Xiang
Hu, through Senmiao International Investment Group Limited, a British Virgin Islands company wholly owned by him, owns 1,057,500 shares
of common stock of the Company.

 

(3)Represents
1,364 shares of common stock underlying 1,364 RSUs, of which, 341 RSUs have been vested but the underlying shares of common stock of
which have not been issued as of the date of this Report.

 

(4)Represents
909 shares of common stock underlying 909 RSUs, of which, 227 RSUs have been vested but the underlying shares of common stock of which
have not been issued as of the date of this Report.

 

(5)Represents
455 shares of common stock underlying 455 RSUs, of which, 114 RSUs have been vested but the underlying shares of common stock of which
have not been issued as of the date of this Report.

 

(6)Includes
112,275 shares of common stock of the Company held in the name of Mr. Wen’s spouse and 5,349 shares of common stock underlying
5,349 RSUs, of which, 455 RSUs have been vested but the underlying shares of common stock of which have not been issued as of the date
of this Report.

 

(7)Represents
5,349 shares of common stock underlying 5,349 RSUs, of which, 455 RSUs have been vested but the underlying shares of common stock of
which have not been issued as of the date of this Report.

 

(8)Represents
4,849 shares of common stock underlying 4,849 RSUs, of which, 455 RSUs have been vested but the underlying shares of common stock of
which have not been issued as of the date of this Report.

 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
 
Certain
Relationships and Related Transactions
 
Our
audit committee must review and approve any related person transaction we propose to enter into which would need to be disclosed under
Item 404(a) of Regulation S-K. Our audit committee charter details the policies and procedures relating to transactions that may
present actual, potential or perceived conflicts of interest and may raise questions as to whether such transactions are consistent with
the best interest of our company and our stockholders.
 
Related
Parties’ Office Leasing
 
On March 31, 2023, Senmiao
Consulting entered into two office lease agreements with the supervisor of Sichuan Senmiao, with a leasing term from April 1, 2023 to
March 31, 2026, which was terminated in December 2023. On March 1, 2021 and April 1, 2021, Senmiao Consulting entered office leases which
was set to expire on February 1, 2026 and April 1, 2024, respectively, which was terminated in October 2022. In December 2023, Senmiao
Consulting entered into another office lease agreement with the supervisor of Sichuan Senmiao, with a leasing term from January 1, 2024
to June 30, 2024. For the years ended March 31, 2024 and 2023, we incurred $96,614 and $177,414, respectively, in rental expenses to the
shareholder.
 
In
September 2019, Hunan Ruixi entered into an office lease agreement which was set to expire in May 2025 with Hunan Dingchentai Investment
Co., Ltd. (“Dingchentai”), a Company where one of our independent directors serves as legal representative and general manager.
The rent was approximately $44,250 per year, payable on a quarterly basis. For the years ended March 31, 2024 and 2023, we incurred expense
of $41,668 and $47,043, respectively, in rent to Dingchentai.
 
We had reached cooperation with Jinkailong, our equity investee company,
that the drivers who leased automobile from Jinkailong completed their online ride-hailing requests and orders through our ride-hailing
platform, and we will pay Jinkailong a certain promotion service fee. During the years ended March 31, 2024 and 2023, we incurred promotion
fee of $11,115 and $95,804 payable to Jinkailong. respectively. The decrease was in accordance with the decrease in the number of rides
completed through XXTX.
 
During
the years ended March 31, 2024, Corenel leased automobiles to Jinkailong and generated revenues of $34,742, while Jiekai leased automobiles
from Jinkailong and had a rental cost of $472,848. During the years ended March 31, 2023,
Corenel leased automobiles to Jinkailong and generated revenues of $344,120, while Jiekai leased automobiles from Jinkailong and had
a rental cost of $509,904.
 


97
 

 
Director
Independence
 
Our
board of directors has determined that each of Mr. Davis, Ms. Lin and Ms. Wang qualifies as an “independent director”
under the Nasdaq listing rules, which is defined generally as a person other than an officer or employee of the company or its subsidiaries
or any other individual having a relationship, which, in the opinion of the company’s board of directors would interfere with the
director’s exercise of independent judgment in carrying out the responsibilities of a director. Our independent directors will
have regularly scheduled meetings at which only independent directors are present.
 

Pay Versus Performance
 
In August 2022, the SEC adopted
final rules to require companies to disclose information about the relationship between executive compensation actually paid and certain
financial performance of the company. The information below is provided pursuant to Item 402(v) of SEC Regulation S-K with respect to
“smaller reporting companies” as that term is defined in Item 10(f)(1) of SEC Regulation S-K.
 


(a)
 Fiscal Year 
(b)
 Summary Comp Table Total for PEO ($)(1)  
(c)
 Comp. Actually Paid to PEO ($)(2)  
(d)
 Average Summary Comp. Table for Non-PEO NEOs 
($)  
(e)
 Average Comp. Actually Paid to Non-PEO NEOs 
($)  
(f)
 Value of Initial Fixed $100 Investment Based on Total Shareholder Return
($)(3) 
(g)
 Net Loss
 ($)(4) 

2023 
 237,570  
 97,571  
 —  
 —  
N/A 
 (3,790,693)

2024 
 183,716  
 48,834  
 —  
 —  
N/A 
 (4,234,214)

 

(1)The dollar amounts reported in column (b) are the amounts of
total compensation reported for Mr. Xi Wen for each corresponding year in the “Total” column of the Summary Compensation Table.
See “Executive Compensation - Summary Compensation Table.

 

(2)The dollar amounts reported in column (c) represent the amount
of “compensation actually paid” to Mr. Xi Wen as computed in accordance with Item 402(v)(2)(iii) of SEC Regulation S-K, which
prescribes certain specified additions and subtractions from the amount in column (b).

 

(3)The Company suffered loss during the years ended March 31, 2024
and 2023, so no substantiality for the calculation of the Total Shareholder Return.

 

(4)The dollar amounts reported in column (g) represent the amount
of net income reflected in our consolidated audited financial statements for the applicable year.

 
Analysis of the Information Presented in the Pay Versus Performance
Table
 
The Nomination and Compensation
Committee of the Board of Directors of the Company does not have a policy or practice regarding evaluating Total Shareholder Return as
part of its determination of compensation decisions for the named executive officers. The Nomination and Compensation Committee takes
various factors into account in determining the competitiveness of its executive compensation. Over the past two fiscal years the Nomination
and Compensation Committee has recognized the significant time and effort required by the executive officer to manage the Company’s
liquidity by raising capital while reducing operating expenses and cash used in operations, secure and maintain the Company’s listing
on the Nasdaq Market.
 
All information provided
above under the “Pay Versus Performance Information” heading will not be deemed to be incorporated by reference in any filing
of our company under the Securities Act of 1933, as amended, whether made before or after the date hereof and irrespective of any general
incorporation language in any such filing.

 


98
 

 
 Item 14. Principal Accountant Fees and Services.
 
Effective
September 1, 2022, Friedman LLP, our then independent registered public accounting firm, combined with Marcum LLP and continued to operate
as an independent registered public accounting firm. On October 12, 2022, our Board of Directors approved the dismissal of Friedman LLP
and the engagement of Marcum Asia CPAs LLP (“Marcum Asia”) to serve as our independent registered public accounting firm.
The services previously provided by Friedman LLP are now provided by Marcum Asia.
 
The
following table shows the fees that we paid or accrued for the audit and other services provided by our independent registered public
accounting firms for the fiscal years ended March 31, 2024 and 2023.
 


  
Fiscal Year  
Fiscal Year 

  
Ended  
Ended 

  
March 31,  
March 31, 

Fee Category 
2024  
2023 

Audit Fees (1) 
$302,000  
$321,700 

Audit-Related Fees (2) 
$20,600  
$10,000 

Tax Fees (3) 
$—  
$10,000 

All Other Fees (4) 
$—  
$— 

 
 


(1)This
category consists of fees for professional services rendered by our principal independent registered public accountants for the audit
of our annual financial statements, review of financial statements included in our quarterly reports and services that are normally provided
by the independent registered public accounting firms in connection with statutory and regulatory filings or engagements for those fiscal
years.

 

(2)This
category consists of fees for assurance and related services by our independent registered public accountant that are reasonably related
to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The
services for the fees disclosed under this category include consultations concerning financial accounting and reporting standards.

 

(3)This
category consists of fees for professional services rendered by our independent registered public accountant for tax compliance, tax
advice, and tax planning.

 

(4)This
category consists of fees for services provided by our independent registered public accountants other than the services described above.

 
Policy
on Pre-Approval of Audit Services
 
Our
audit committee pre-approves all services, including both audit and non-audit services, provided by our independent registered public
accounting firm.
 


99
 

 
PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
 

(a)The
following documents are filed as part of this Report:

 

(1)The
Financial Statements in Item 8 herein; and

 

(2)Index
to the Financial Statements in Item 8 herein.

 
All
financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required
information is presented in the financial statements and notes thereto in Item 15 of Part IV below.
 

(3)Exhibits

 
We
hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by
reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington,
D.C. 20549. Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington,
D.C. 20549, at prescribed rates or on the SEC website at www.sec.gov.
 
 Item 16. Form 10-K Summary
 
Not
applicable.
 
EXHIBIT INDEX
 


Exhibit No.
 
Description

 
 
 

3.1
 
Articles of Incorporation of the Company, incorporated herein by reference to Exhibit 3.1 to the Amendment No.7 to Registration Statement on Form S-1 filed with the SEC on March 14, 2018

 
 
 

3.2
 
Certificate of Amendment to Articles of Incorporation of the Company, incorporated herein by reference to Exhibit 3.2 to the Amendment No.7 to Registration Statement on Form S-1 filed with the SEC on March 14, 2018

 
 
 

3.3
 
Certificate of Change of the Company filed with the State of Nevada on March 30, 2022, incorporated herein by reference to Exhibit 3.1 on the Current Report on Form 8-K filed by the Company with the SEC on April 6, 2022

 
 
 

3.4
 
Certificate of Correction filed with the State of Nevada on April 5, 2022, incorporated herein by reference to Exhibit 3.2 on the Current Report on Form 8-K filed by the Company with the SEC on April 6, 2022

 
 
 

3.5
 
Certificate of Amendment to Articles of Incorporation of the Company, on May 2, 2022, regarding the increase of authorized shares, incorporated by reference to Exhibit 3.5 on the Annual Report on Form 10-K filed by the Company with the SEC on July 13, 2023.

 
 
 

3.6
 
Bylaws of the Company, incorporated herein by reference to Exhibit 3.2 to the Registration Statement on Form S-1 filed by the Company with the SEC on October 30, 2017.

 
 
 

4.1
 
Description of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, incorporated herein by reference to Exhibit 4.4 on the Annual Report on Form 10-K filed by the Company with the SEC on July 9, 2020

 
 
 

4.2
 
Form of Warrant relating to the August 2020 offering, incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on August 4, 2020

 


100
 

 


4.3
 
Form of Placement Agent Warrant relating to the February 2021 offering, incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on February 9, 2021

 
 
 

4.4
 
Form of the Investor’s Common Stock Purchase Warrant relating to the May 2021 offering, incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on May 11, 2021

 
 
 

4.5
 
Form of the Placement Agent’s Common Stock Purchase Warrant relating to the May 2021 offering, incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K filed with the SEC on May 11, 2021

 
 
 

10.1
 
Employment Agreement between the Company and Chunhai Li, incorporated herein by reference to Exhibit 10.18 to the Amendment No. 7 to Registration Statement on Form S-1 filed with the SEC on March 14, 2018

 
 
 

10.2
 
Form of Director Offer Letter, incorporated herein by reference to Exhibit 10.19 to the Amendment No. 7 to Registration Statement on Form S-1 filed with the SEC on March 14, 2018

 
 
 

10.3
 
Investment and Equity Transfer Agreement, dated as of November 21, 2018, by and among Senmiao Technology Limited, Hunan Ruixi Financial Leasing Co., Ltd., Hunan Ruipin Cultural Industry Co., Ltd., Luziyun International Group (Southeast Asia) Shares Limited and Chengdu Little Monkey Information and Technology Co., Ltd. incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company with the SEC on November 28, 2018

 
 
 

10.4
 
Business Cooperation Agreement and Valuation Adjustment Mechanism and Indemnification Agreement, dated August 26, 2018, by and among Sichuan Jinkailong Automobile Leasing Co., Ltd., Hunan Ruixi Financial Leasing Co., Ltd., Xiaoliang Chen, Xi Yang, Yiqiang He and Xiaohui Luo, incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by the Company with the SEC on February 19, 2019

 
 
 

10.5
 
Amendment to Business Cooperation Agreement and Valuation Adjustment Mechanism and Indemnification Agreement, dated October 16, 2018, by and among Sichuan Jinkailong Automobile Leasing Co., Ltd., Hunan Ruixi Financial Leasing Co., Ltd., Xiaoliang Chen, Xi Yang, Yiqiang He and Xiaohui Luo, incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed by the Company with the SEC on February 19, 2019

 
 
 

10.6
 
Collaboration Agreement, dated August 13, 2019, by and between Didi Chuxing Technology Co., Ltd. and Sichuan Jinkailong Automobile Leasing Co., Ltd., incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the SEC on February 14, 2020

 
 
 

10.7
 
Collaboration Agreement, dated December 6, 2019, by and between Didi Chuxing Technology Co., Ltd. and Hunan Ruixi Financial Leasing Co., Ltd., incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed with the SEC on February 14, 2020

 


101
 

 



10.8
 
Employment Agreement, dated as of May 27, 2019, by and between Senmiao Technology Limited and Xi Wen, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on May 30, 2019

 
 
 

10.9
 
Employment Agreement, dated as of September 17, 2018, by and between the Company and Xiaoyuan Zhang, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on September 20, 2018

 
 
 

10.10
 
Form of Hunan Ruixi Financial Leasing Contract, incorporated herein by reference to Exhibit 10.30 to the Annual Report on Form 10-K filed with the SEC on July 5, 2019

 
 
 

10.11
 
Form of Hunan Ruixi Service Agreement, incorporated herein by reference to Exhibit 10.31 to the Annual Report on Form 10-K filed with the SEC on July 5, 2019

 
 
 

10.12
 
English Translation to Investment Agreement, dated July 4, 2020, by and among Hongyi Industrial Group Co., Ltd., Hunan Ruixi Financial Leasing Co., Ltd., Sichuan Jinkailong Automobile Leasing Co., Ltd. and other shareholders of Jinkailong, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on July 8, 2020

 
 
 

10.13
 
Employment Agreement, dated as of September 11, 2020, by and between the Company and Haitao Liu, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on September 14, 2020

 
 
 

10.14
 
Form of Securities Purchase Agreement relating to the May 2021 offering, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on May 11, 2021

 
 
 

10.15
 
Placement Agency Agreement dated May 11,2021 (including Form of Lock-Up Agreement in the exhibit) relating to the May 2021 offering, incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on May 11, 2021

 
 
 

10.16
 
English Translation of the Investment Agreement, dated September 11, 2020, by and among Sichuan Senmiao Zecheng Business Consulting Co., Ltd., Hunan Xixingtianxia Technology Co., Ltd. and its shareholders, incorporated herein by reference to Exhibit 10.40 to the Annual Report on Form 10-K filed with the SEC on July 8, 2021

 
 
 

10.17
 
English Translation of the Supplementary Agreement to the Investment Agreement, dated February 5, 2021, by and among Sichuan Senmiao Zecheng Business Consulting Co., Ltd., Hunan Xixingtianxia Technology Co., Ltd. and its shareholders, incorporated herein by reference to Exhibit 10.41 to the Annual Report on Form 10-K filed with the SEC on July 8, 2021

 
 
 

10.18
 
Share Swap Agreement, dated October 22, 2021, by and among Senmiao Technology Limited, Sichuan Senmiao Zecheng Business Consulting Co., Ltd., Hunan Xixingtianxia Technology Co., Ltd. and the shareholders of Hunan Xixingtianxia Technology Co., Ltd., incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on October 28, 2021.

 


102
 

 


10.19
 
Loan Agreement, effective
    July 28, 2021, by and between Xi Wen and Senmiao Technology Limited, incorporated by reference to Exhibit 10.44 to the Annual Report
    on Form 10-K filed with the SEC on July 15, 2022

 
 
 

10.20
 
Loan Agreement, effective August 17, 2021, by and between Xi Wen and Senmiao Technology Limited, incorporated by reference to Exhibit 10.45 to the Annual Report on Form 10-K filed with the SEC on July 15, 2022

 
 
 

10.21
 
English Translation of the Loan Agreement by and between Senmiao Technology Limited and Xiang Hu*(1)

 
 
 

10.22
 
Share Swap Agreement by and between Senmiao Technology Limited, and two minority shareholders of Hunan Ruixi Financial Leasing Co., Ltd.*

 
 
 

10.23
 
English Translation of Current Lease Agreement of Senmiao Technology Limited’s Principal Executive Office(1)

 
 
 

14.1
 
Code of Ethics, incorporated
    herein by reference to Exhibit 14.1 to the Amendment No. 7 to Registration Statement on Form S-1 filed with the SEC
    on March 14, 2018

 
 
 

21.1
 
List of Subsidiaries*

 
 
 

23.1
 
Independent registered public accounting firm’s consent*

 
 
 

31.1
 
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

 
 
 

31.2
 
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

 
 
 

32.1
 
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

 
 
 

32.2
 
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

 
 
 

97.1
 
Compensation Recovery Policy of the Company.*

 
 
 

101.INS
 
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document*

 
 
 

101.SCH
 
Inline XBRL Taxonomy Extension Schema Document*

 
 
 

101.CAL
 
Inline XBRL Taxonomy Extension Calculation Linkbase Document*

 
 
 

101.DEF
 
Inline XBRL Taxonomy Extension Definition Linkbase Document*

 
 
 

101.LAB
 
Inline XBRL Taxonomy Extension Label Linkbase Document*

 
 
 

101.PRE
 
Inline XBRL Taxonomy Extension Presentation Linkbase Document*

 
 
 

104
 
Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document*

 
 


*Filed
herewith

 

**Furnished
herewith

 

(1)Portions
of the exhibit, including certain private and confidential information has been omitted pursuant to Item 601(a)(6) and Item 601(b)(10)(iv)
of Regulation S-K. The Registrant hereby agrees to furnish a copy of any omitted portion to the SEC upon request.

 


103
 

 
SIGNATURES
 
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
 


Date: June 27, 2024
SENMIAO TECHNOLOGY LIMITED

 
 
 

 
By:
/s/ Xi Wen

 
Name:  
Xi Wen

 
Title: 
Chief Executive Officer

 
 
(Principal Executive Officer)

 


 
 
 

 
By:
/s/ Xiaoyuan
    Zhang

 
Name:  
Xiaoyuan Zhang

 
Title: 
Chief Financial Officer

 
 
(Principal Financial and Accounting Officer)

 
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 


Name
 
Position
 
Date

 
 
 
 
 

/s/
    Xi Wen
 
Chief Executive Officer, President and Chairman of
    the Board
 
June 27, 2024

Xi Wen
 
 
 
 

 
 
 
 
 

/s/
    Xiaoyuan Zhang
 
Chief Financial Officer 
 
June 27, 2024

Xiaoyuan Zhang
 
(Principal Financial and Accounting Officer)
 
 

 
 
 
 
 

 
 
 
 
 

/s/
    Trent Davis
 
Director 
 
June 27, 2024

Trent Davis
 
 
 
 

 
 
 
 
 

/s/
    Xiaojuan Lin
 
Director
 
June 27, 2024

Xiaojuan
    Lin
 
 
 
 

 
 
 
 
 

/s/
    Sichun Wang
 
Director
 
June 27, 2024

Sichun Wang
 
 
 
 

 
 
 
 
 

/s/
    Jie Gao
 
Director
 
June 27, 2024

Jie Gao
 
 
 
 

 
 
104
 















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Prepaid expense
The balance of prepaid expense represented automobile purchase prepayments, automobile liability insurance premium for automobiles for operating lease and other miscellaneous expense such as office lease, office remodel expense, etc. that will expire within one year.
Deposits
The balance of deposits mainly represented the security deposit made by the Company to various automobile leasing companies, financial institutions and Didi Chuxing Technology Co., Ltd., who runs an online ride-hailing platform. As of March 31, 2024, the allowance for credit losses of $17,841 was recorded against the security deposits not returned for more than one year after the end of the cooperation.
Receivables from aggregation platforms
The balance of receivables from aggregation platforms represented the amount due from the collaborated aggregation platforms based on the confirmed billings, which will be disbursed to the drivers who completed their rides through the Company’s online ride-hailing platform.
Value added tax (“VAT”) recoverable

The balance represented the amount of VAT, which resulted from historical purchasing activities and could be further used for deducting future VAT in PRC.
Due from automobile purchasers, net
The balance due from automobile purchasers represented the payments of automobiles and related insurances and taxes made on behalf of the automobile purchasers. The balance is expected to be collected from the automobile purchasers in installments. As of March 31, 2024, the allowance for credit losses recorded against receivables due from automobile purchasers was $2,633. During the year ended March 31, 2024, the Company recorded provision for credit losses of $2,652 against the balance from an automobile purchaser.





639863




Payables to drivers from aggregation platforms

The balance of payables to drivers from aggregation platforms represented the amount the Company collected on behalf of drivers who completed their transaction through the Company’s online ride-hailing platform base on the confirmed billings.
Deposits

The balance of deposits represented the security deposit from operating and finance lease customers to cover lease payment and related automobile expense in case the customers’ accounts are in default. The balance is refundable at the end of the lease term, after deducting any missed lease payment and applicable fee.
Payables for expenditures on automobile transaction and related services

The balance of payables for expenditures on automobile transaction and related services represented the payables balance to the miscellaneous expenses related to the daily operations of automobiles.
Loan repayments received on behalf of financial institutions

The balance of loan repayments received on behalf of financial institutions represented the loan repayments made by the automobile purchasers to financial institutions through the Company, which has not been paid to the financial institutions.
























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xbrli:shares



iso4217:USD


xbrli:shares



xbrli:pure

iso4217:CNY

aihs:Days


